When going through a divorce, one of the most common concerns for business owners is whether they will lose their business. For many, their business is not just a source of income, but a passion and a vital part of their identity. While each divorce case is unique, there are general guidelines and considerations that may impact what happens to your business in a divorce. Read this blog and reach out to a seasoned Rochester divorce lawyer from Lacy Katzen LLP to learn more.
How Are Businesses Treated in a Divorce in New York?
In New York, divorce settlements are guided by the principle of equitable distribution. This means that marital property is divided in a way that is considered fair but not necessarily equal. Whether your business will be classified as marital property or separate property will significantly impact what happens to it.
If you started your business before getting married, it may be considered separate property, which typically means that it would not be subject to division in the divorce. However, if the business grew significantly during the marriage or if marital assets were used to support the business, then the increase in value could be considered marital property. In these cases, the court may decide that your spouse is entitled to a share of the business or its value.
Will My Spouse Be Entitled to Part of My Business?
The answer to this question depends on several factors. If your spouse contributed to the business in any way—whether through direct involvement in operations, financial support, or even by handling household responsibilities to free you up to focus on the business—the court may take that into account. In some cases, your spouse may be awarded a portion of the business’s value, even if they were not directly involved in its day-to-day operations.
The court will also consider other factors, such as how long the marriage lasted, the standard of living during the marriage, and each spouse’s financial needs and contributions. If your spouse is entitled to part of the business, that does not necessarily mean they will co-own it. Often, a financial settlement can be arranged where your spouse receives other assets or a payment equivalent to their share of the business’s value, allowing you to retain full ownership.
Can I Protect My Business in a Divorce?
If you are concerned about the potential impact of a divorce on your business, there are proactive steps you can take. One of the best ways to protect your business is by having a prenuptial or postnuptial agreement in place. These agreements can specifically outline how the business will be treated in the event of a divorce, providing clarity and reducing the likelihood of a drawn-out legal battle.
If you are already in the divorce process, and do not have a pre-nuptial or post-nuptial agreement, working with an experienced divorce attorney who understands business valuation and asset division is crucial. Your attorney can help negotiate a settlement that allows you to retain control of your business, while ensuring that any financial obligations to your spouse are met fairly.
