From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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so there’s two parts to determining a
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distribution of a business asset the
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first part is you have to figure out
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actually the value of the business and
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the second part is you need to figure
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out what is the
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percentage that your client will
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actually achieve or the other client
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will pay out in terms of that percentage
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so in New York it’s pretty rare to have
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a 50/50 split of a business business
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asset so we should be clear about that
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the range is anywhere from I would say
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20% to probably
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40% sometimes someone Works in a
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business who is the non-titled spouse to
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the business so they may be actually a
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big factor in the business and then
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maybe they reach something like 45% and
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in that rare case 50% but you’re usually
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not talking about a 50/50 split of a
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business asset and you’re not talking
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about getting the business asset usually
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you’re talking about a payout a lumpsum
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payout whether it be over time perhaps
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with interest or whether it be a lumpsum
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payout that you will receive at the time
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that you settle your case or after a
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trial of the matter now it’s complicated
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you may need a forensic accounting firm
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or an accounting firm who can value the
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business that’s something that needs to
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happen and there will be various
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documents that have to be produced
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whether you own the business or the
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other person is actually looking to get
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get their share of the business there
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will be a lot of production in terms of
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documentation I mentioned earlier
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General ledgers for example you will be
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actually asked to produce the general
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ledgers probably in Native format so
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that it will be much easier for the
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accounting firm to go through it and you
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will be asked to produce loan documents
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financial statements credit card
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statements bank accounts um you may be
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actually asked to have Partners come in
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and have depositions these are all
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things that could happen in order to
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Value the business what the valuator is
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trying to do is to figure out what the
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value would be if two um willing parties
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were actually buying buying and selling
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the business and they’re looking at
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normalizing certain things when they’re
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doing this so they are normalizing for
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example the expenses of the business you
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may have a situation where people are
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paying personal expenses at of the
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business well that wouldn’t necessarily
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be a normal expense of a business and so
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they will be deducting those actual
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expenses that are being paid out of the
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business you may be paying rents to
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someone who is a family member who may
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own the property on which the business
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is actually being conducted the rents
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may be higher than what is normal and so
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you may be looking at normalizing the
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rents you may normalize the salaries and
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the compensation of both the owner and
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some of the other employees so there may
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be a whole host of of things that are
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done including discount rates that are
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taken including figuring out what a cap
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rate is so there is a whole host of
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things that are done to Value the
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business now you have the second part
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what was the other spouses the
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non-titled spouse to the business what
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was their
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contribution it can be direct or
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indirect so did they help raise the
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family while someone was out building
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the business that’s important did they
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go to the dry cleaners cook the meals
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you know pick up the kids do all of that
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so that someone actually could be
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working in their business and traveling
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for business and taking out clients for
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business did they socialize with people
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in the business and clients that would
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be important to the business these are
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all things that we look at in terms of
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contribution so did they actually work
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in the business well that’s a direct
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contribution and so the percentage that
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you may be entitled to because of a
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direct contribution will get higher than
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for indirect contributions but they’re
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all contributions and so you want to
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figure out what was the assistance level
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of the non-titled spouse in this
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business and then come to some agreement
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on percentage in New York it’s very rare
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for the non-titled spouse to actually
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have an ownership interest in the
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business after the divorce it it’s very
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rare because it’s really you want to
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separate the party ities as much as you
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can and having them be in the same
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business particularly when it may be the
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non-titled spouse who didn’t work in the
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business and really doesn’t understand
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how the business works and can’t add in
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a meaningful way to the business it
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would be best to separate out the
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spouses therefore we have to figure out
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what is the percentage of the value that
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the non-titled spouse will receive at
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the end of a divorce in New York it’s
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usually not 50% I’m going to tell you
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that I know that’s disappointing to some
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people
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but unless you’re really involved in the
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business per se on a day-to-day basis or
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the marriage is very long or this some
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other reason it’s likely not to be 50%
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it could be anywhere from 20% to 40%
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sometimes if you’ve been involved in the
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business to some degree maybe it’s 45%
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of the marriage is long but essentially
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for the non-titled spouse there’s going
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to be a payout and the other spouse the
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spouse who owns the business is going to
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receive the business so that they can
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carry on
New York is an equitable distribution state. However, equitable does not necessarily mean equal. This is a crucial distinction when one spouse operates a professional practice and a knowledgeable divorce attorney can help you ensure you receive your fair share of the practice’s assets in your divorce.
As a family law attorney and Certified Divorce Financial Analyst, Lisa Zeiderman is uniquely positioned to protect your legal and financial interests in divorce.
In order to make sure assets are equitably distributed, they must first have their value accurately determined. This includes determining:
The practice’s worth at the time of divorce will be used to determine how the practice fits in the overall marital property settlement. For example, if a doctor keeps full control of their practice, it will be necessary to distribute other assets to their spouse to keep things equitable.
The value of future business income will be used for the purposes of calculating spousal support and/or alimony as part of the overall divorce settlement.
There are numerous options for how to distribute the value of a professional practice in divorce. A spouse can make the claim that the practice is separate property; the burden of proof rests on the spouse who is asserting that the practice is not marital property.
If the practice is considered marital property, options for division and distribution include:
As your divorce attorney, Lisa Zeiderman can help you negotiate a solution that protects your interests and positions you to move forward successfully. Contact her today to schedule an appointment.
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