Should I Buy Spouse’s Share of Business Before Divorce?
If going through a divorce wasn’t difficult enough for couples, business owners have much more to consider before and during the divorce process. Businesses owned by either one or both spouses are often considered joint property in New York divorces. As a result, it might be considered a shared asset and be subject to equitable distribution laws.
An experienced divorce attorney can assist you if you are a business owner going through the dissolution of your marriage and are concerned about the future of your company. Keep reading to find out if you should sell your share of the company to your spouse before you get divorced on Long Island.
Marital Property vs. Separate Property in New York Divorce
First, it’s important to consider how New York family courts approach both separate and marital property during divorce. In the vast majority of divorces, companies created during a marriage are deemed to be jointly owned assets, meaning the business is co-owned by both spouses. Even if you founded the business on your own and created it entirely without your spouse’s assistance, if this was done after the date you were legally married, the business will most likely still be treated as marital property.
Nassau and Suffolk Family Courts generally presume that marital assets were utilized to create the organization and that both parties made contributions for the betterment of the business. It might be challenging under New York state law to declare a business that was created during a marriage as solely one spouse’s property or the other.
However, one way to do so is for one spouse to “buy out” the other before the divorce, which means that one spouse purchases the other’s shares in the company, thus becoming the sole owner of those shares. If you and your spouse are the only owners, you would then assume sole ownership of the business and its assets.
What Your Spouse Is Entitled To In Divorce
Divorcing spouses are each entitled to roughly half of the assets accumulated during a marriage, distributed equitably (not necessarily equally) between both spouses. This is the case regardless of which spouse was the one to accumulate the assets.
If you want to continue running the business on your own without your spouse, you should strongly consider purchasing your spouse’s shares of the company before you get a divorce. This way, you are the sole owner of the business, and the courts will deem your spouse fairly compensated for their share of the company. Even if your spouse has done nothing to support the business during your marriage, they are still entitled to approximately half of the value of the company. The same is true if your spouse was the one who created and operated the business while you were married. In the latter case, you would be the one with an inherent claim to a portion of the company’s value.
If you don’t purchase your spouse’s assets or stake in the business, then they have the option to make an offer to purchase yours. You can choose to accept or decline this offer. If you are offered a buyout and decline, the court could compel you to liquidate the business so the proceeds can be equally divided between you and your spouse. In both cases, you would no longer be able to operate the company or collect its profits.
Get Help Dividing Your Business in a Long Island Divorce
If you own a business and are considering getting a divorce in New York, the most important thing you can do is reach out to an experienced divorce lawyer or family law attorney to obtain guidance on your next best move. How you proceed now in the beginning stages of your divorce can impact you for months or even years to come, well after your divorce has been finalized. This is particularly the case when you own a business with your spouse or create a business while you are married.
Contact experienced divorce lawyers and family law attorneys Hornberger Verbitsky, P.C. to learn more about property division during a divorce and how to protect your shares of a jointly held business when dissolving your marriage. Call our office today by dialing 631-923-1910 or filling in the short form on this page. Our team is available now to help.
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