In this article, you can discover…
- Steps you can take to protect your business after a divorce.
- How businesses are valued during a divorce.
- How marital property is defined in New York, and how this could impact your business.
As A New York Business Owner, What Legal Aspects Should I Consider During A Divorce?
The first thing to consider during a divorce is the size of your business. How big is your business, and what kind of structure does it have? It’s a good idea to let your business partners or co-officers know about the divorce beforehand so they understand the situation and are not surprised by visits from your spouse or their attorney.
If you are an equity partner or have a sizable percentage ownership of a corporation, the next question to ask is whether your business was started during the marriage. If so, your spouse may have a share in that business and be entitled to that as part of the divorce.
You may also wish to meet with an experienced wealth protection advisor to determine how to best protect your company and its assets through a divorce. Be sure to get in touch with a certified divorce financial planner and an accountant, as well, to make sure your company’s finances are in order and to plan for the divorce.
Can My Business Be Considered A Marital Asset?
Generally speaking, a business that was started during the marriage is considered marital property and a divisible asset.
If your business was started before marriage but has grown considerably during the time you were married, this is known as “appreciation of active value” – a percentage of that amount may be considered a marital asset, as well.
For example, suppose your business was only worth $100,000 at the time of marriage but has grown to a million-dollar business throughout the marriage. In that case, your spouse may be entitled to a percentage of that active appreciation.
A forensic accountant would be needed to determine a price tag for that value amount. If the issues cannot be settled by a forensic accountant, a Judge will weigh in and give their determination as to the overall active appreciation of your business.
Will New York’s Equitable Distribution Law Affect My Business Assets?
New York Law requires assets to be split equitably or fairly between a divorcing couple. Even if your spouse had nothing to do with the foundation and growth of your business over the years, they may still be entitled to up to 50% or more of the value of your business.
It’s important to get in touch with a divorce attorney, wealth protection advisor, accountant, and financial planner as early in the process as possible. If possible, while divorce is still looming and has not yet been filed for. This early preparation will put you in a better position to protect your business assets and prepare your business for the financial aspect of the divorce.
Attorney David Bliven is a hard-working divorce lawyer serving New York. For over 25 years, he’s helped clients just like you protect their business through a divorce and avoid common pitfalls.
Have questions about protecting your enterprise with divorce on the horizon?
Reach out to the Law Offices of David Bliven at (347) 797-1188 | (914) 362-3080 for an initial consultation today!
How Will My Business Be Valued During A Divorce?
A business is valued by a forensic accountant, who will have a list of documents they will ask your business to produce. They will ask for, among other things, tax returns, schedules, bank account records, asset listings and financial statements from audits or appraisals.
They will also ask for information on ledgers and employee payments. If anyone owes your business money or if your business owes anyone money, documents related to those debts will be requested.
The forensic accountant will also ask for a list of fixed assets, such as real estate investments, and may request appraisals. Documentation related to distribution to shareholders will also be sought, and information related to marketing and advertising may be requested, as well.
All of this data will be used to value your business and evaluate its growth history and finances during the time you were married.
How Might Divorce Impact Me Financially As A Business Owner?
On a personal level, if you have children, you may be asked to pay child support or spousal maintenance if there is a significant difference between your respective earnings. Some business owners don’t see a divorce coming and mix personal and business expenses, e.g., using a business account to make personal vehicle payments.
This can be disastrous and land you in serious trouble with the other party’s forensic accountant, costing you considerably during a divorce. Make sure your business and personal expenses are clearly separated and have all documentation for valid business expenses (such as receipts, invoices, and bills) ready.
How Can Divorce Impact My Business’ Cash Flow And Operations?
The enormous effort it will take you to comb through years of documents can be a huge distraction that negatively impacts cash flow. For that reason, it may be recommended to hire a forensic accountant of their own. Your accountant can communicate with your spouse’s accountant and help streamline the document-seeking process, leaving you freer to focus on running your business.
The less distracted you and your team are, the less normal business proceedings will be impacted. Hiring a forensic accountant to communicate with me and with the other party’s accountant will take a considerable burden off of your shoulders and allow cash flow to continue more normally.
What Other Steps Can I Take To Protect My Business Before And During A Divorce?
Be prepared for the divorce as early as possible. If you own a larger business worth millions, tens of millions, or hundreds of millions, begin to assemble a team early. Get an attorney, an accountant (for tax advice purposes), a certified divorce financial planner, a wealth protection advisor, and a forensic accountant.
Your divorce attorney can also help you better understand the documents and professional help that you will need to assemble your case. Your attorney can also coordinate with your forensic accountant to streamline that process and get the documentation you’ll need ahead of the divorce.
This lets you, as a business owner, focus on your business with fewer distractions and allows you a much less stressful divorce when that bridge is crossed.
Still Have Questions? Ready To Get Started?
For more information on Protecting Your Business During Divorce, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (347) 797-1188 | (914) 362-3080 today.
Attorney David Bliven is a hard-working divorce lawyer serving New York. For over 25 years, he’s helped clients just like you protect their business through a divorce and avoid common pitfalls.
Have questions about protecting your enterprise with divorce on the horizon?
Reach out to the Law Offices of David Bliven at (347) 797-1188 | (914) 362-3080 for an initial consultation today!
