In a New York divorce proceeding, a spouse’s business frequently constitutes the most intricate asset subject to equitable division. Contrary to the common assumption that a spouse is automatically entitled to fifty percent of the businee;s value, New York law does not prescribe such an automatic allocation. Please continue reading to gain insight into the factors that determine the quantum of your share in a spouse’s business and how our proficient Suffolk County Marital Property Attorney can provide assistance throughout this challenging time.

How is a Spouse’s Business Divided in a New York Divorce?

New York uses an equitable distribution model for marital property, meaning assets are divided fairly based on statutory factors, not necessarily equally (50/50). A closely held business, professional practice, or company interest can be classified as marital property and subject to this division. However, the court will consider circumstances like income, contributions, and future prospects to determine the fair share.

A business is categorized as marital property, separate property, or both. Generally, assets acquired during the marriage are marital. While a business started before the marriage may have a separate value, any appreciation during the marriage, espeically id fue to marital efforts or funds, can be treated as marital. A divorce attorney can help trace the business’s history to identify the value “in play.”

It should be noted that since 2016, enhanced earning capacity (from degrees, licenses, etc.) is no longer a distributable marital asset. Nevertheless, the court still considers contributions made to a spouse’s career when dividing other assets, including the business. An attorney can clarify how this shift affects your case.

What Factors Determine What Share I’ll Receive of My Spouse’s Business During a New York Divorce?

Dividing a business in a New York divorce involves a comprehensive analysis of the following factors under equitable distribution law:

  • Acquisition Timing and Marital Growth: The court will assess whether the business was started before or during the marriage, as well as how much of its growth resulted from marital contributions (joint financial efforts or one spouse’s support at home). 
  • Duration of the Marriage: Longer marriages typically strengthen the non-owner spouse’s claim, as the business’s success is seen as the product of a long-term economic partnership. 
  • Direct and Indirect Contributions: The court will consider all forms of contribution, including working in the business (formally or informally) and non-financial support like managing the household and childcare.
  • Business Valuation: Determining the fair market value of the business, often involving forensic accountants, is essential to calculate the appropriate marital share. 
  • Financial Circumstances: The business’s role as a source of ongoing income and the impact of any career sacrifices made by the non-owner spouse are key considerations. 
  • Liquidity and Practicality: New York courts often prefer a distributive award (a buyout or structured payment) to the non-owner spouse instead of dividing the business itself, to keep the entity intact.
  • Waste and Misconduct: A spouse’s actions, like dissipating assets or hiding income through the business, can lead to a larger share for the non-offending spouse.
  • Agreements and Business Documents: Prenuptial and postnuptial agreements or internal business documents (like shareholder agreements) can significantly influence the division or valuation methodology. 

If you are contemplating or going through a divorce in New York, where your spouse owns a business, it is in your best interest to schedule a consultation with an attorney at the Law Offices of Susan A. Kassel, P.C. Our legal team is prepared to help protect your financial stake in the business you helped build.