If you or your spouse own an interest in a business, you can be certain that it will feature prominently in your divorce. New York is an equitable distribution state, which means all property acquired by either spouse during the marriage is subject to division. However, a stake in a business presents special challenges, especially since the very division of ownership can have a negative effect on the business’s value.
A business ownership interest may be considered marital property in any of these circumstances:
Assuming the business is marital property, then the next question is how much it is worth. To conduct a business valuation, it is common for each spouse’s lawyer to retain accountants or professional appraisers. They will generally use one of three valuation models:
Each spouse’s appraisers often arrive at different values. When this happens, it is typically in the spouses’ best interests to negotiate and arrive at a compromise value that is somewhere in between the two estimates. This approach avoids the expense and uncertainty of litigating the issue.
Once a value is determined, a number of questions must be answered to calculate how much the non-owner spouse is entitled to. For example, did the non-owner spouse compromise his or her career to raise children so the owner spouse could focus on business? Did the non-owner spouse do things that helped the company grow without receiving fair compensation for their work?
Finally, the business interest will be allocated in one of a number of ways. The business might be sold and the proceeds divided. One spouse can buy out the other’s interests. Or, one spouse can agree to accept a larger share of other assets in exchange for giving up his/her stake in the business. In certain instances, the spouses may each be granted an ownership stake, with the original non-owner spouse receiving dividends or other forms of compensation. Avoiding a sale is often important to maintain the business’s viability and value.
At the Law Offices of Randy S. Margulis in Buffalo, we are skilled in dealing with the special considerations for dividing business ownership in a New York divorce. Feel free to call 716-886-9600 or contact us online.
As a Buffalo divorce lawyer for 28 years, I have devoted myself to solving the problems that affect families throughout the Buffalo metropolitan area and Western New York. As a family law attorney, I make it my goal to create a partnership of trust with my clients. People put their trust in me to handle cases that can potentially have a long-lasting impact on not only their lives, but the lives of their family as well.
Alexandra M. Rockwood is a Senior Associate Attorney with the Law Offices of Randy S. Margulis & Associates and has been with the firm since early 2020. She primarily practices in the areas of matrimonial and family law, including divorce, child custody, and child support. Alexandra is a practicing matrimonial and family law attorney as…