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Do You Have a Right to a Family Business in Divorce?


Divorce is no doubt an emotional nightmare, but it is also a financial and legal separation of a couple, and their family.

When considering divorce, spouses have a lot to consider financially like budgets, assets, property and retirement accounts. But one very important asset, and sometimes an emotional asset to think about is the family business and whether the business is subject to marital distribution.

The good news is when it comes to the family business, both spouses may have an ownership interest in the business. Even if not, there is often a financial entitlement to a spouse.

A few months ago, a couple read my reviews on Google and contacted me. They were a pair who were sadly divorcing after 12 years of marriage. They told me they had tried marriage counseling and simply fell out of love. After lots of discussion with me they decided they wanted an amicable approach to their divorce and chose to use mediation as their vehicle. They had 3 children, 2 homes, valued at over 9 million dollars, $600,000 in assets, other assets, retirement accounts, and a lucrative Japanese Fushion restaurant in NYC they estimated was worth over 2 million (largely due to their reputation and location).

Discussions and decisions about dividing this couple’s assets, property and establishing child support and maintenance went pretty smoothly. Deciding how the business would be handled required some understanding and sensitivity because it was a lot more financially complicated, involved cash payments, and emotions were running high. In the end, I was able to successfully devise a plan for the division of the family business that was financially sound, fair and acceptable to both parties.

With reference to the family business I explained to them some due diligence needed to be done to determine the value of the business and who deserved what.

So first we worked with our team of experts to evaluate the shares of the business. (I have a wonderful team of experts who assist me – they are truly impressive!) We did the following:

  1. compared their Japanese Fusion business to other similar businesses;
  2. had a forensic accountant / professional appraiser review the businesses’ tax returns and financial information;
  3. examined assets and liabilities of the business to determine value;
  4. looked at the cash flow of the business and the deductions.

Next, we considered the following to evaluate what each spouse had contributed the family business:

  1. the date the business was established;
  2. whose funds were used to start the business;
  3. analyzed the contributions both parties made to the marriage, house, children and the business;
  4. identified who had the skillset to successfully run the business;
  5. investigated the value of the business before the marriage;
  6. compared the value before to the value of the business upon divorce;
  7. determined the change in value of the business from the beginning till the divorce.

At the end of their mediation process I was successfully able to devise a plan addressing the family business that was financially sound, fair and acceptable to both parties.

If you are divorcing and a family business is of concern, call me. I have over 35 years’ experience including being a corporate lawyer at Sullivan & Cromwell and owning several businesses in order to help divorcing couples with their businesses using legally sound strategy and psychology to find the best solutions!

Schedule your free consultation today! We still have some appointments available for March. My direct line is 212.734.1551.

Warm wishes,