Dividing Business Assets in Divorce

Attorney Chaim Steinberger | 888-981-0039 | Schedule Your Consult Today

"I tell people the two things you hope never to need is a doctor and a lawyer, but if you need, you need the best you can afford. ‘Cause a bad doctor and a bad lawyer is worse than no doctor and no lawyer."

Divorce is often already rife with bad feelings and hard decisions. If you own a business, it could be even more so as you and your spouse figure out what happens to your business now. Dividing business assets in divorce requires skill and experienced legal representation.

Chaim Steinberger is a family law attorney with Chaim Steinberger, P.C, based in New York. In this interview, he explains the many factors that go into consideration when dividing business assets in divorce.

To learn more, contact the attorney directly by calling 888-981-0039 or by submitting a contact form on this page.

Key Takeaways From Chaim Steinberger:

Businesses are often the most valuable assets a couple has, and the law governing how that business is to be handled during a divorce may vary from state to state. Steinberger practices in New York, so the advice in this video may or may not pertain to your situation, though it is likely to at least have strong similarities.

Anything you owned before you were married is your own separate property.

However, if there is an appreciation of that separate property after marriage, it may be subject to distribution.

If the business you owned before you were married is worth the same amount of money when you divorce, it is not subject to equitable distribution.

Steinberger maintains that if your business was worth $5 million before you were married, and it is worth $5 million at the time of your divorce, that is considered separate property and cannot be subject to equitable distribution.

If the business you owned before marriage increases in value, the difference in the starting value and final value may be distributed.

Steinberger suggests that if your business was worth $5 million before you married, and now at the time of your divorce is worth $15 million, the extra $10 million appreciated during the time you were married can be equally distributed as part of the divorce settlement.

For your spouse to have a claim on the appreciated value of the business, it must be an actively-managed asset.

If your business increases in value as a result of sheer circumstance and not as a result of efforts made by you or your spouse, the appreciated value of the business will be considered separate property and is not subject to equitable distribution.

If one or both of you worked in the business during the time that value was appreciating, the value is subject to equitable distribution.

The argument for this rule is that even if only one of the parties was working in the business at the time it was appreciating value, these efforts were only made possible by the other party maintaining the home. If the spouse at home is providing meals, childcare, cleaning, home environment, etc. allowing the other spouse to devote their energy to the business, it can be argued that both spouses are responsible for the success of the business. In community property states, this issue may be more complex.

The value of a business can be difficult to discern.

To determine fair value, your attorney may cross-examine the experts who assigned the initial number to your business. Fair value is generally determined by what a willing buyer and seller would agree the price of the property is. This is not an exact science and discretionary adjustments can be made.

Adjustments may need to be made regarding the assumed percentage of ownership.

Factors that can affect this include what amount of income both parties are taking and what a buyer would pay for the business if you were not there to manage it.
Essentially, this boils down to what you would have to pay someone to do the job you’re doing. If you could earn the same salary working for your business as you could elsewhere, you have built yourself a job, not a business. In this case, the business owner is often doing the job of multiple people, which can affect the percentage of ownership.

To learn more, contact Chaim Steinberger directly by calling 888-981-0039 or by submitting a contact form on this page.

Disclaimer: This video is for informational purposes only. In some states, this video may be deemed Attorney Advertising. The choice of lawyer is an important decision that should not be based solely on advertisements.

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