The two million small businesses comprise more than 95% of New York businesses and employ about half the private workforce in the state. When you consider that percentage with the number of divorces that occur, it is easy to see that many divorces involve parties who own a small business.
In litigated divorces, the Empire State follows the equitable distribution method to determine how marital assets are divided between spouses. Whether you have to part with your business depends on many factors. There are ways to better protect it before and during a divorce.
Protect Your Business Before a Divorce
No one wants to enter a marriage by imagining its end. When you own a business, though, a prenuptial agreement can be an effective tool to isolate the business from any divorce action. If you begin your business after you have married, then a postnuptial agreement can provide similar protection.
These documents can dictate the terms of property distribution beyond the business as well. These agreements can also establish that you keep the business in exchange for your spouse receiving other marital property.
Another safeguard for your business can be through a buy-sell agreement. These contracts are particularly helpful when both spouses own a business. They can stipulate how one spouse may be able to buy out the other or that other partners are given the chance to purchase a spouse’s portion of the business.
Instead of investing all the proceeds from your company back into the business, make sure to pay yourself a proper salary. Otherwise, your spouse can claim in a divorce that they are entitled to part of the money you reinvested in your business when you should have provided it to the family during the marriage. They may want to be compensated for that sacrifice.
Like inheritance, you should keep all business finances separate from personal joint accounts and purchases. Doing so makes it more difficult for your spouse to claim those funds are part of the marital estate. On the flip side, do not use personal funds to pay for something within the business.
Protect Your Business During a Divorce
If you did not take steps to secure your business during your marriage, you still have options during your divorce.
One of the first measures your attorney will take is to get an accurate business valuation. The valuation will include expenditures, liquid assets, equipment, outstanding contracts, payables and receivables, inventory, and more. When couples understand the true value of a company, they are better able to come to a mutual agreement.
Most owners put blood, sweat, and tears into their businesses. Often the business is an extension of themselves. You may need to make concessions to your spouse if you want to hold on to your company. That could include letting them have a greater share of the other marital property or providing spousal support for a specific time to account for their loss. If your spouse is a co-owner, you might be able to pay them a lump sum or make periodic payments to buy their portion.
Better Agreements Are Made Outside of Court
Business assets are subject to equitable distribution laws, with the court weighing multiple factors in determining how property should be divided. Coming to an agreement outside of the courtroom usually results in a better resolution.
The attorneys at the Law Office of Dennis R. Vetrano, Jr., LLC have extensive experience in complicated divorce cases such as those involving businesses. We have the knowledge to guide divorcing couples to a mutually agreeable solution. When that is too high of a hurdle, we stand ready to fight for your rights to your business in a court of law.
If you have a business and are married, call us to learn how we can help protect your company. If you have a company and are considering divorce, we can represent your interests in negotiation or before a judge.
To schedule a free consultation, call us at (845) 605-4330 or submit our online form. We serve Dutchess, Orange, Putnam, Rockland, Ulster, and Westchester counties.