Dividing a family business in a divorce

Divorce negotiations in New York and around the country become more challenging when the spouses involved own a business. This is because businesses are both an asset with tangible value and a source of future income. The simplest approach is to sell the business and divide the proceeds, but this is rarely an attractive option.

A more popular strategy is for one of the spouses to buy out the other’s share. Securing the money needed to complete a buyout is not always easy, and spouses may not be receptive to a deferred payment plan if their goal is a clean break.

Determining the value

Establishing the value of a family-owned business is often a long and contentious process. Businesses that are struggling could have great potential, and companies that have been profitable in the past may have seen their best days. Professional appraisers are usually called in to put a value on business assets, but experts often disagree.

Issues to work out

Spouses who give up their share of a business in a divorce may wish to start new companies, which could lead to future conflicts over client poaching. Non-compete clauses are commonly used to address this problem. Disputes may also arise over when a business should be sold. One spouse may wish for a quick sale and a swift resolution while the other would prefer to wait for market conditions to improve.

These issues can be extremely challenging, and traditional negotiations that are adversarial in nature may not be the best venue to resolve them. When divorces are complex and property division talks are likely to become contentious, experienced family law and divorce attorneys in Rochester may suggest alternative approaches like collaborative divorce or mediation. Mediators are skilled at finding common ground and defusing tense situations, and mediation is generally far less costly than a public court battle.