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Your business is on the line during a divorce

On Behalf of | Sep 20, 2017 | Divorce

It is nice to know that, despite media reports painting a picture of gloom, most marriages do not end in divorce. In fact, the most recent analysis of data shows the opposite, that divorce rates are declining. However, this news may not console you if you are in the minority whose marriage is coming to an end. You are likely full of questions and concerns about your future and what you can do to protect your interests.

If these interests include a business, your concerns may be on many fronts. The business is not only the result of your hard work and investment of time and money, it is also likely your source of income and perhaps the income of your employees. If you did not take precautions to guard against it, your business may become just another marital asset, subject to division during divorce proceedings. A divorce may place that business in jeopardy.

Preparing for the worst

Ideally, while it may not have been pleasant, you considered the possibility of divorce from the outset. This may have included protecting your business through a prenuptial or postnuptial agreement, depending on whether you began the business before or after your wedding day. A pre- or post-marital contract defines your business assets and the limits to which your spouse benefits from the business in the event of a divorce. Your spouse may have agreed to relinquish any claim to the business.

However, if you did not consider such a contract or your spouse did not agree to it, you may have taken other steps to protect your business, for example:

  • Refusing to hire your spouse as an employee
  • Avoiding the solicitation or acceptance of your spouse’s ideas or input for the business
  • Limiting other involvement of your spouse in the daily working of the company
  • Funding and managing your business assets separately from your personal accounts
  • Paying yourself a salary to avoid your spouse claiming you denied the family the benefits of the business profits

Documenting these factors carefully may help you prove that the business is not a marital asset, although it may be difficult.

Protecting yourself when your options are limited

If your personal life is hopelessly intertwined with the success of your business, you may have few choices. For example, if you have business partners, you may be able to sell your options to the partners. While the funds of the sale become marital assets, your spouse will not have the opportunity to negotiate becoming an owner of your business.

To save your share of the business, you may have to haggle the exchange of other marital assets. To do this, you must know the value of your business. You and your spouse may be able to come to an agreement about what the business is worth and what would make a fair exchange. On the other hand, seeking the advice of a New York professional will help you determine an acceptable value and assist you in the protection of your interests.


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