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HOW DO I PROTECT MY BUSINESS IN A NEW YORK DIVORCE?
June 30, 2017
I want to protect my business before I get a divorce so how do I protect my ownership rights in my business in A New York Divorce case?
If you have a business be sure you lock it all up by use of a partnership agreement an LLC or as a shareholder. Also have an agreement between your partners for a buy and sell agreement limiting each partner from transferring stocks to a spouse of another partner.
These sorts of Partnership and operating agreements between members of your company should have special clause in them providing for protection such as the following provisions: Make sure each partner gets a prenuptial agreement or nuptial agreement, if you can, which waives the other spouse’s interest in your business. This not only protects you it also protects your partners. Also make sure the agreement has a clause in it prohibiting any partner or shareholder from transferring or gifting shares in the company to others and in this way, you manage more effectively and maintain control over your business in the event of a divorce of any of the partners. Paying a hefty salary to yourself is also very important as you do not want to pay into your business during a divorce and have it grow in value only for your spouse to claim a larger share in it.
No matter how you cut it, if your business was started during the marriage or if it appreciated in value during the marriage your spouse has a claim to it, but it is not necessarily an equal share. For instance, if your spouse was employed by your company and helped build the company her contribution would be larger so his or her interest in same will be larger.
So. Let us say you protected your business with an operating agreement: does that mean your spouse will not get a share of the business in proportion to contributions? Unfortunately, the answer is that the business will be valued and your spouse will have to be compensated in one way or another. Just because he or she cannot own shares in the business does not mean she or he will not be compensated by a New York divorce court. That is where you can do a tradeoff and buy the spouse out through other assets that were acquired during the marriage such as retirement accounts, savings, real estate or promissory notes paid off over time.
Sometimes the sale of the business or parts of it are the only way to pay off the spouse but you can also liquidate some of the items and still try to keep your company afloat.
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