Many people living in Westchester County own either all or a portion of a business. If successful, the business may be the person’s main source of income and the most valuable asset in their portfolio. They may also have invested a lot of their time and efforts in growing and maintaining the business.
In some cases, the business may have been in the person’s family for generations.
The bottom line is that a person with a business will want to protect it from divorce.
With some exceptions, the value of a business is marital property under New York law even if only one spouse had a legal ownership interest in it and even if that spouse was the one who worked the business.
When a business is marital property, New York courts will divide it between the spouses in a manner that the court deems fair.
One way a business owner can protect their business is by signing a prenuptial agreement with their spouse. A prenuptial agreement can spell out that in a divorce, a business owner keeps their agreement outright as separate property. One should keep in mind that under New York law, there are several criteria a prenuptial agreement must satisfy before a court will enforce it.
Even without a prenuptial agreement, there are ways to protect one’s business
A person can still take steps to protect their business even if they do not have either a prenuptial agreement or a valid claim that their business is not marital property.
A good first step toward doing so is to make sure the business is accurately valued. Putting the right value on one’s business involves several considerations. To give a couple of examples, the future performance of a business and tax implications can affect a business’s value.
Owners should also realize that, on a practical level, it might not make sense to a court or even to one’s spouse to transfer ownership of part of the business owner’s interest.
Often, the business owner will be able to negotiate a fair buyout of their spouse’s fair share either by trading other property or negotiating the terms of a settlement payment. Of course, it will be important for the business owner to protect their other economic interests when doing so.