Family businesses make important contributions to New York’s economy. And as you can imagine, it takes years of hard work to build a successful family business.
When a marriage comes to an end through divorce, however, the thought of losing a family business can trigger overwhelming stress. This is because, just like any other marital property, the family business will be up for division per the state’s marital property laws.
Subject to the circumstances of your divorce, here are three options you can consider when going through a divorce that involves a family business:
One spouse might buy out the other
This is perhaps the most common approach – one spouse purchasing the other party’s shares in the business. Before taking this route, however, it’s important that you take a couple of factors into account. One of these is ensuring that the buyout is complete within one year from the date of the cessation of the marriage to avoid potential tax implications.
Sell the business
If a buyout is not an option, then you may sell the business and divide the proceeds per the state’s property division statute. Just like other marital assets, the proceeds will be shared based on each party’s contribution, the duration of the marriage and each party’s earning capacity.
Keep the business as co-owners
If the divorce is amicable, then you may consider the option of keeping the business as joint owners. Of course, this comes with its share of challenges. For instance, one spouse might change their mind down the road or fail to live up to their responsibilities as far as the business’ management is concerned. To address this and other concerns, you may consider drafting and signing a partnership agreement that clearly articulates each party’s responsibilities and entitlements.
Divorce can be complicated if you have a family business. Find out how you can safeguard your rights and interests when going through a divorce that involves a family business.
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