If You Own a Business, Choose a Divorce Mediator Who Knows Business
Business ownership can be a major point of contention in a divorce, but that doesn’t mean you have to litigate your case if you have a family business. You can resolve issues of ownership, valuation, and future interest through mediation, as long as you choose a mediator who knows business.
Whether you enter divorce mediation or go to trial, the first issue to be decided is who owns the business. Is the business the separate property of one spouse, or is it part of the marital estate? Generally, speaking, the answer depends on when the business was started and by whom. Here are a few possible scenarios:
- Separate property — One spouse started a company independently before the marriage with his or her own funds. The other spouse has not contributed to the business in any material way during the marriage.
- Marital property — Both spouses started the business before the marriage, or one or both spouses started the business during the marriage with funds from the marital estate.
- Was separate, now might be marital — One spouse started the business before the marriage but took marital funds to keep it going and never repaid those funds to the marital estate. Or one spouse started the business before the marriage, but the other spouse gave material assistance to make the business successful and was not compensated for their work at the regular market rate.
If a preliminary look at the facts indicates the business is a marital asset, we have to ask:
- How much is the business worth?
- What percentage of the business does each spouse own?
These questions matter, because if the spouses want to go their separate ways, one spouse must surrender all interest in the business. But are there sufficient marital assets to compensate the exiting spouse for the business interest? Or does the spouse who gets the business have enough personal assets for a buyout? Can that spouse use the business as collateral for a loan to buy out the other spouse? What are the tax consequences of a buyout to each party?
If a buyout proves impossible at the moment, what types of ownership arrangements make sense? Can the spouses continue as co-owners and partners after their divorce? Would one spouse be happy as a silent partner receiving passive income from the business? How much income would be appropriate under those circumstances? Can income be time-limited as a buyout?
If your divorce mediator is a social worker or psychologist, he or she may be quite skilled at getting parties to reach a compromise. But if your mediator has no background in business ownership and operations, or experience handling business disputes, what you agree to can be seriously flawed.
Fortunately, Solutions Divorce Mediation has skilled mediators who have experience with conflicts over business assets. Our mediators are attorneys who aggressively litigate these types of disputes in Long Island divorces. We understand the rules for establishing ownership, and we consult qualified experts who can determine the proper value of a business. When you choose our services, you get thorough and reliable guidance to resolve your business ownership issues.
If you are a business owner planning to file for divorce, call Solutions Divorce Mediation, Inc. at 1.631.683.8172 or contact our Long Island office online.