What Do Business Owners Need to Know When Considering Divorce in New York?
The process of disentangling a married couple’s lives can be complicated in a divorce case, but when one or both spouses owns a business, the financial complexities can quickly spiral over the head of an inexperienced divorce lawyer. If you or your spouse own(s) a business and are facing the possibility of divorce, it is essential to start working with an attorney who understands the issues you will need to address and how to guide you through the procedure to preserve your business assets going forward.
At Nolletti Law Group, we have decades of experience helping business owners protect their personal and business interests through proceedings involving property division, child support, alimony/maintenance, and other contentious and costly issues. We know what is at stake and work hard to cover all the bases to develop a plan you can live with.
Looking at the Big Picture of Business in Divorce
If you have a pre- or postnuptial agreement that addresses the business, then the terms in that agreement may have a considerable impact on how the business is handled in a divorce. For couples who don’t have an agreement, or if the agreement is unenforceable, then applicable provisions of New York law take the forefront in determining how various issues will be resolved. Some of the factors you will need to consider include:
- Whether the business is separate property under New York law
- Whether there is a marital property component as a result of post-marriage appreciation
- Valuation of the business or a partner’s particular interest in a business
- Reasonable compensation for a working owner
- Whether personal expenses are paid through the business
- True income for support purposes
- Selling business interests (does one spouse buy out the other? Do both sell and split the proceeds?)
- Automatic orders to preserve the status quo
- Cash flow and liquidity issues
- Procedures for continuing business operations
One of the most critical factors is to ensure that you have the ability and authority to maintain company operations so that the business doesn’t stagnate and lose value.
Parents who are business owners have additional concerns. On paper, they may appear to have access to more assets than they actually have available, because so many assets are devoted to the business. It can be challenging to obtain fair arrangements for alimony/maintenance and child support that leave enough income to maintain a decent standard of living.
Business Valuation in New York
If a business is owned by both spouses with no outside owners, and both partners agree to sell the business and divide the proceeds as marital property, it may not be necessary to hire a professional business valuator. In most other circumstances, hiring an independent forensic accountant who specializes in business valuation is a wise and often necessary investment.
While it is certainly possible to obtain a valuation from the company’s regular accountant, it is usually better to bring in a separate, independent professional who has no ties to the business and cannot be accused of bias in the process when there are contested facts and legal issues involved in the valuation process. In a case where there are no such contested facts and legal issues, you can ask the court to appoint a neutral forensic accountant, agreed on by both parties, and then neither party has grounds to assert that a valuation is tainted by partiality.
Part of the business valuation process will include “normalization”– making adjustments to account for special situations which may not be reflected in current accounts. For instance, company vehicles or cell phones provided to family members may be added back into cash flow. Adjustments may also need to be made for personal travel and entertainment expenses, or compensation or benefits provided to family members above or below fair market value.
Consult an Experienced Business Owners’ Divorce Lawyer Serving New York
Many divorce lawyers are terrific at counseling their clients and holding their hands during emotional crises. But when you’re dealing with the complexities of a business in divorce, you need more. You need someone with expertise in handling the complicated decisions and actions that are so critical when business owners face divorce.
At Nolletti Law Group PLLC, we routinely guide divorcing spouses through the minefields of the divorce process with a focus on helping our clients preserve their interests and values in business assets that they have worked long and hard to acquire. Schedule a consultation with us today to learn more about how we can help.