You have spent years building your business, only to worry that you will lose half of its value or more when facing divorce. Fortunately, individuals who live in New York can take steps to legally shield their company from a spouse during the property division process.

Understanding state laws can help you determine how the court may divide your business during divorce.

Separate vs. marital property

If you started the business before your marriage, the business itself falls into the category of separate property in New York. However, the court considers the increase in the value of the business that occurred during the marriage as marital property, which is subject to equitable (fair but not necessarily equal) division. For example, if your business was worth $10,000 eight years ago when you got married and $50,000 today, the judge may entitle your spouse to half the increase in value, or $20,000.

Possible payment arrangements

If the scenario in the example sounds familiar, you have a few choices when it comes to exactly how your spouse will receive his or her share of the business. Depending on the circumstances of your case, the judge may allow you to:

  • Make payments over time for a specific number of years
  • Pay a lump sum in exchange for future control over the company and its earnings
  • Forfeit other property, such as vehicles, artwork, furniture or real estate, in exchange for your spouse’s stake in the business

The role of contractual agreements

If you are still married but have concerns about the future of the union, or if you are planning to marry but worry about the future of your business in the event of divorce, you can take several steps to protect your company. A prenuptial or postnuptial agreement can specify a flat fee or percentage of the company that your spouse will receive in divorce. The company’s bylaws can also indicate how the business will buy out founder spouses if divorce occurs.