The division of a family business during divorce is a complex issue. This is due to the strong emotional connections and potential for future earnings that are usually deeply interwoven with the business. Please continue reading as we explore the different strategies for dividing this asset during divorce proceedings and the importance of consulting an experienced Garden City Divorce Lawyer when divorce threatens your family business.
How Can a Family Business Be Divided in an NY Divorce?
Before considering the best approach for dividing your family business, it’s essential to understand New York law regarding the classification of marital property. New York is an equitable distribution state, which means that property acquired during the marriage is split fairly among spouses, not necessarily equally. The court will consider various factors to determine what is fair.
With this in mind, a family business can be divided through several methods, including one spouse buying the other’s share in the business. This is one of the most common strategies, as it allows a spouse to continue operating the business. Another option is to sell the business. The proceeds will then be divided between the spouses. This is typically the desired avenue when neither spouse wishes to continue operating the business.
In some cases, spouses may consider continuing to own and operate the business together. This requires an amicable working relationship and clear agreements regarding the management of the business. If you are facing a contentious divorce, keeping the business intact may not be a viable option.
Depending on the unique circumstances, you can also consider placing the business in a trust, with a trustee managing it. Additionally, you can consider one spouse continuing to run the business while the other receives a percentage of future profits. It’s in your best interest to consult with an attorney to determine the best course of action.
Should I Consider a Prenuptial Agreement?
Before you tie the knot, establishing a clear agreement regarding asset division is highly recommended. If a prenuptial agreement exists, it should be the first point of reference, particularly if the business was acquired before the marriage. Such agreements can be used to specify the business’s fate in the event of a divorce.
Similarly, postnuptial agreements function like prenuptial agreements. For businesses started during the marriage, both partners must agree to terms defining ownership, revenue management, asset and debt division, or sole ownership designation. This arrangement can safeguard the non-owning partner from the business’s debts.
Alternatively, if no prenuptial or postnuptial agreement is in place, a buyout agreement can protect a family business from the consequences of a divorce. This contract can dictate business governance if a co-owner dies, is ousted, or departs. In the event of a divorce, buyout agreements allow a former spouse to sell any business interest back to the owners at a predetermined price.
At the Law Office of Eyal Talassazan, P.C., we are prepared to help you preserve your family business. Connect with our firm today to learn how we can fight for you during these difficult times.
