If you are contemplating a divorce New York and own a business in New York City, Hudson Valley, or Long Island, you may be concerned about whether your spouse could have a claim to an interest in the company. Business interests can be complicated to value and understanding how that business will be valued and divided is essential. New York high-net-worth divorce cases involving business interests can raise complex questions about marital property, separate property, and equitable distribution. Knowing how New York law treats business ownership and valuation can help you protect your financial interests during the divorce process. Additionally, always consult with a NYC divorce lawyer to protect your interests.
Separate Verus Marital Property in New York
Before valuing a NYC business in a divorce, it is crucial to determine whether it is marital or separate property. Generally, property acquired during marriage is marital, while property owned before marriage, inheritances, and certain gifts are generally separate. A valid prenuptial or postnuptial agreement may also establish certain property rights in the event of a divorce.
A business owned before marriage may remain separate, but its increase in value during the marriage may be subject to equitable distribution if the other spouse’s contributions helped produce that appreciation. Those contributions may be direct, such as working in the business, or indirect, such as supporting the owner’s career or managing the household.
New York’s Equitable Distribution Law
New York’s divides all marital assets in a divorce by “equitable distribution” meaning in a way that is fair and equitable. This does not necessarily mean equal 50/50 split. New York Domestic Relations Law § 236 directs courts to consider numerous factors for property division, including the length of the marriage; each spouse’s age, health, income, education, occupation, and earning capacity; their assets and debts; and their present and future financial needs.
The court also considers what each spouse contributed to the marriage and to the increase in value of marital property. Other factors the court can look at include each spouse’s likely future financial circumstances, the nature of the assets being divided, tax consequences, and whether either spouse wasted or improperly transferred marital assets. The court may also consider any factors it determines to be just and proper.
As a result, a 50/50 division may certainly be appropriate in some marriages, but it is never automatic. The court evaluates the circumstances of the particular marriage to determine an equitable distribution of the marital estate.
Determining the Value of a Business
Determining the value of a business is a key step in deciding how much of its value may be subject to equitable distribution in a divorce. The valuation must reflect the business’s actual economic circumstances. Courts may consider financial records, business operations, assets, liabilities, income, earning history, and other evidence presented by the parties’ experts. The court may also consider issues affecting the ability to sell or transfer an ownership interest, including restrictions contained in agreements or the limited market for a particular business interest.
Will the Business Have to Be Sold?
A court does not have to order a business sold simply because both spouses have an interest in its value. Instead, one spouse may retain the business while the other receives other marital assets or a distributive award, which is a payment used to account for the other spouse’s share of the marital interest. This can allow the business to continue operating without requiring the spouses to become business partners after a high new worth divorce.
Talk to a New York Attorney and Protect Your Business During a Divorce
High-net-worth divorces involving business interests require careful attention to both the value of the assets and how New York law classifies them. At The Law Offices of Alexandria Lipton, we help clients navigate complex divorce matters, including identifying marital versus separate property and addressing business valuation issues. Our goal is to understand your unique circumstances and help you pursue the best possible outcome for your financial future. Contact us today to discuss your high-value divorce and learn how we can help protect your interests.