Divorce is already a complicated process, and it can be even more complex for business owners. If you do not handle these matters with precision, a divorce judgment may damage your business interests. Because New York law requires an equitable division of marital property, business owners must take careful steps to protect their assets.
A dedicated divorce lawyer for business owners in Albany may help protect your business interests during the property division process. If you have questions about your legal or business rights, our divorce lawyers at The Colwell Law Group may explain your options.
State law requires equitable division of marital property, meaning a fair, though not necessarily equal, split of marital assets between spouses. Under New York Domestic Relations Law § 236, Courts generally review all assets accumulated from the date of marriage and consider those assets marital property unless they fall under certain exceptions.
Whether business assets fall within marital property or remain separate may depend on certain details, including:
Simply shielding a business within an LLC or other corporate entity will not automatically protect business assets from property division. Corporate structures can protect against general liability, but they do not necessarily protect business property from a divorce judgment.
Another common misconception is that a business will be considered separate property if it was formed before the marriage. Courts may review whether the other spouse contributed personally or financially to the business during marriage and whether marital assets supported the business during that time. Commingling marital and business assets can convert the business into marital property and create confusion between the two.
Pre-nuptial agreements may help owners avoid common pitfalls that can subject their businesses to property division. However, a Court can scrutinize and even invalidate pre-nuptial agreements during a divorce, which is why working with a skilled Albany divorce attorney for business owners can be critical.
One step in the equitable distribution process is to evaluate business assets and determine whether they are separate property or marital property. When state Courts review a business’s value during divorce proceedings, they may consider:
Three (3) methods are often used to value a business during a divorce. In an asset-based approach, all assets the business owns, compared with its total liabilities, are reviewed. An income-based approach uses what the business earns, and is expected to earn in the future, to create a current valuation. A market-based approach evaluates similar businesses that have been recently sold, using their sales figures to estimate the business’s value.
Different approaches may project different values, and people often dispute which method and valuation are the most accurate. A knowledgeable Albany attorney may provide guidance on this and other business ownership matters during a divorce.
Divorce is often a stressful and uncertain process, especially when your business interests are involved. An experienced divorce lawyer for business owners in Albany may help you understand what your business is worth, how it should be classified, and how to protect your ownership interests. To learn more, contact our team at Colwell Law today to schedule your consultation.
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