There are two types of property designations in a divorce – there is separate property and marital property. Separate property usually includes assets or properties acquired prior to the first day of your marriage, or property purchased using separate funds. Marital property is the property that your New York court will divide equitably between you and your spouse.
Most states follow the equitable approach when it comes to dividing marital assets. In the case of your business, the contributions by you and your spouse, the timeframe in which the business was founded or purchased and the allocation of relevant funds may all make a difference in how the court divides your ownership.
That said, you do not have to leave it to the court to decide the fate of your shares. Typically, there are three options for how to handle your small business in a divorce:
- Buy out your ex-spouse: You may, of course, purchase the interest of the business from your spouse if the two of you can come to an agreement. It may help you to note that this particular transaction would not be considered a taxable sale but rather a transfer of properties between spouses.
- Sell: You could either collectively sell your business or you yourself could sell your interest to your spouse. You would then divide the funds according to the court’s orders for asset distribution or an otherwise agreed-upon percentage.
- Work together: Do you get along well as business partners? Maybe the best option for you is to remain together in the business venture. It could take some time to acclimate to the new situation following your divorce. But you may find this is a preferable option, especially if your business is thriving and you do not want to disturb your profits with big changes.
Consider also negotiating the terms of your business division via mediation. Mediation is an alternative means of resolving disputes that will give you and your ex-spouse an opportunity to discuss arrangements without the need for a court appearance.
