If you are getting divorced and have a small business, your business is likely your most valuable asset. The value of your business is so much more than its monetary valuation. You (and possibly your spouse) may have devoted months or years of hard work to build what you have. If you are getting divorced, you and your former partner may need to make crucial business decisions that can impact your lives going forward. When it comes to small business ownership, there are many different circumstances that can impact how your business will be handled during a divorce. What are some scenarios that can play out?
- You owned and ran the business prior to your marriage and you took steps to protect your business through establishing proper corporate formation structures and by having a proper prenuptial agreement in place. If this is the case, you may be able to keep your business and many assets as you divorce.
- You owned and ran the business prior to your marriage, but you didn’t take steps to protect the business through corporate formation structures or by having a prenuptial agreement. Your partner may have contributed to the business after you were married and now has a significant or even minor financial stake in your business. If marital funds were used to invest in the business, the courts may rule that your partner deserves some share in the value of the business. If this is the case, you partner may be entitled to receive either shares, equity, or some other asset in exchange for the value he or she created for your business.
- You and your partner went into business together and you both played a role in establishing, investing in, and growing the business. If this is the case, you and your partner may need to consider how you’ll manage the business going forward. Will you continue to manage your business together? Can you divide the business without damaging your brand or services? Will one partner buy the other out? This is where divorce and business can get complex.
If you owned the business prior to the marriage, and took proper steps to protect your business, either through a prenuptial agreement, corporate formation, or some other structure, you may be able to keep your business through your divorce. However, if you didn’t take steps to protect your business or if you and your partner went into business together, you may be facing a more complex divorce because questions about how to move forward with your business may play a role in your divorce. The Elliot Green Law Offices are divorce lawyers in Brooklyn, New York who may be able to assist you if you are getting divorced and share a business with your partner. The purposes of this article are to address situations where the business in some way might be considered marital property, either due to one partner adding value to the business during the marriage, or due to the fact that both parties started the business together as a married couple. If you have questions about how to protect a business you brought into your marriage, or how to protect a business before your get married, you may want to look more closely at how a prenuptial agreement can help you. The Elliot Green Law Offices are divorce attorneys who can assist you whether you are now facing divorce or whether you need assistance with a prenuptial agreement.
Business Divorce and Marital Divorce
If you and your partner went into business together or if you both share a stake in the business, one option you and your partner might have is to go through a business divorce while also going through your marital divorce. Business divorce can be complex, and you may need to hire a divorce lawyer and also a business lawyer to assist you with this process. The Elliot Green Law Offices can help you with the marital divorce side of things and help you understand the difference between marital and separate property.
Several considerations must be made when dividing business interests during a divorce. First, you and your partner may need to determine how much of a share you both own in the business. If you started the business together, you may be able to determine that this will be a 50-50 split, but if one of you owned the business before you were married, the business may be both marital property and separate property, and determining the split may be more complex.
When dealing with a business during divorce, either you or your partner can continue to run the business together, with each of you earning the amount of profit from the business proportional to your stake or share in the company. For couples going through a contentious divorce, this could be difficult to do. Other couples may put the business up for sale and split the proceeds accordingly. Yet others may determine what the business would be worth, and then one partner “buys out” the other partner’s share. Sometimes one partner may buy out the share by giving the partner more marital property, real estate, or through an alimony settlement. There are many ways that this can be done.
The most complex issue will involve valuing the business and determining what share, if any, either partner owns in the company. This information is just meant to be informative and nothing can replace the counsel of a divorce lawyer and business lawyer as you navigate this process. Consider speaking to the Elliot Green Law Offices, divorce lawyers in Brooklyn, New York who can look more closely at your situation, help you understand whether your business is considered marital or separate property, and assist you with navigating the complex issues that can arise when you are going through a divorce and also own a business.
Protecting Your Business During a Divorce in Brooklyn, New York
The best way to protect your business, is by taking steps before you get married to make clear who owns what. Prenuptial agreements, proper corporate formation, and paying yourself a fair salary from business profits are all ways you can protect yourself. However, if you went into business with your partner or if your partner contributed to your business, you may need to navigate a business divorce along with your marital divorce. The Elliot Green Law Offices are Brooklyn, New York divorce attorneys who understand how difficult this process can be. We can help answer your questions, connect you with the right resources, and provide you with a road map forward during this stressful and emotional time.
