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Is Your Business or Practice up for Grabs in a Divorce?


You’ve spent countless hours working to build your business. You have an intellectual property law firm or pediatric medical practice or even a landscaping company. You’ve taken on loans and have worked more weekends than you care to remember. But you’re finally at a point where your business is thriving.

Unfortunately, you’re also at place in your life where you’re going through a divorce.

When you first started your business or practice you never considered that it could be deemed a marital asset that gets evaluated and divided under current New York State law. You are now being forced by a judge to relinquish a substantial portion of your business value to your soon-to-be former spouse. How could this be? It’s not fair. It’s not right. This is a serious threat to decrease the value of your business.

Hopefully this is all hypothetical—except the part about the thriving business.

Unfortunately, in my thirty years as a family law attorney, I’ve seen far too many cases like the one I’ve described above.

When starting your business or practice it is imperative that you divorce-proof your business. Here a few ways you can do that:

  • A prenuptial agreement—With a prenup, couples can decide what portion of their business is considered separate property from the marital assets as a result of a divorce. With something like a small business where the two spouses areboth owners, a prenup can establish from the start the distribution of business interests to each spouse.
  • Create a buy-sell agreement—This protects any of your business partners from having your former spouse as an unwanted business partner. It also protects you from having their spouses as business partners.
  • A postnuptial agreement—Similar to a prenup except this agreement takes place during the marriage. However, spouses have limited leverage and can no longer say “I’m not marrying you if…”
  • Pay yourself a fair salary— If all you’re doing is reinvesting your profits back into the business and not into your household, your spouse could make a claim that they are entitled to a larger share of your business.

How to protect your business during a divorce:

  • Mediation—Rather than litigation and months of court proceedings, this is a much more flexible method in settling the business end of your divorce. It is a customized manner in which to split the value of your business or practice, which is normally evaluated by a professional forensic accountant.

- If you do owe your spouse a portion of the value of your business or practice, you can use one or more of your other marital assets to pay off your spouse.

- You can pay your spouse the value of what you owe them over time, with or without interest.

For any other questions regarding the many variables of protecting your business from divorce, please feel free to call me at (646) 663-4546.