Dividing marital assets can be one of the most difficult aspects of divorce, and when a family business is involved it gets even more complicated. If the business is a marital asset, then each spouse is entitled to a share, even if one spouse wasn’t an owner or operator. Because the vitality and net worth of the business can be affected, dividing this complex asset must be managed effectively for the sake of all involved.

New York’s equitable distribution statute says that an asset is marital property, and therefore subject to division, if it was acquired during the marriage or increased in value during the marriage. It does not matter that one spouse’s name is not on any of the documents. Nor does it matter if one spouse wasn’t involved in the business operation. They still may be entitled to a share. However, the statute allows a court to consider the impossibility or difficulty of evaluating an interest in a business, as well as the economic desirability of keeping that interest intact and free from any claim or interference.

As such, New York courts encourage property settlements that result in the least disruption of the business or decrease in its value. Assuming the spouses do not want to run the business together after divorce, then the ownership interests could be addressed in the following ways:

• One spouse could give the other additional marital assets, such as a house or car, to compensate them for their share of the business.
• If there are not enough assets to trade, one spouse can execute a property settlement note, whereby he or she pays out the value of the other spouse’s share of the business over time, with interest.
• If no agreement can be reached, the business can be ordered sold and the proceeds divided.

In any of these situations, there must be a careful and reliable valuation of the business. There are a few different ways to do this, and it usually requires retaining an independent business valuation expert. Each spouse has the right to hire their own expert to value the company. Business valuators look at multiple factors, such as:

• What type of product or service is provided
• The local business environment or market
• Whether the business is a corporation, partnership, LLC or other entity
• Any goodwill that has been built up

As part of equitable distribution, the court will consider any contributions made by the non-owner spouse, both to the operation of the business and to the family household at large, to determine the value of his or her share.

If you are headed for divorce and have concerns about how your business will be affected, Bombardo Law Office, P.C. in Syracuse is ready to advise you. I have nearly 28 years of experience representing people in New York divorces. Please call 315-800-4002 or contact me online to arrange a consultation.