Partners with your Spouse in a Business – what are potential problems while Divorcing, Importance of having right Corporate Formation documents and a Pre-Nuptial Agreement as well as a Post-Nuptial Agreement. All explained by a Divorce Law Attorney Marina Shepelsky of Brooklyn, NY.

Pitfalls on Having a Business with a Spouse.

Michael Levitis  00:00

Good day everybody. This is Michael Levitis From JurisQ.com with a divorce attorney Marina Shepelsky.  Marina, welcome back.

Marina Shepelsky  00:07

Hi, guys, how are you?

Michael Levitis  00:09

Thank you for always answering our frequently asked questions on divorce law, we will have a lot of questions. And the next question that I have for you is, you know, sometimes you open a small business or a bigger business with your spouse. That could be a little tricky. And can you tell us? What are the pitfalls of opening a business for the spouse? And why even have your own separate attorneys preparing the paperwork for the business?

Marina Shepelsky  00:42

Ah, to hard question, Michael, I’m always glad to help you guys. But you always asked me the hardest questions, I think. Okay. First of all, I think it’s really tough to work together. It’s a husband and wife team. However, that happens a lot. The reality is, it happens frequently that you know, people who are married, they end up having a business together and work together, you know, they’re self employed together, it happens a lot. The pitfalls are as follows. Let’s say one person uses their money from before marriage to invest in a new business, let’s say it’s a husband, he got an inheritance from his parents. And he decides to take 100,000, he received one one of his parents and aunts and uncle died, and invest in a business, the wife and now helping him set it up, you know, helping him run and hire people.

Michael Levitis  01:39

Sweat Equity

Marina Shepelsky  01:41

It’s called Sweat Equity. Yeah, so um, you can’t any longer claim the husband, the husband can no longer claim that that was his business, because she actually helped him bring up this business. And the fact that this was his separate property, inheritance, meaning it wasn’t marital, it wasn’t something that he was planning to put into the marital property, perhaps that argument goes out the window, because if somebody worked with you on this business, you know, you could have lost your whole entire inheritance. But instead, it went into business, hopefully, it grew, and so on. So it’s not something that you can necessarily claim. Second of all, people when they’re getting divorced, they don’t have the same interest, in fact that interests are completely the opposite of each other. So if you are thinking of separation, or divorce, and you are getting into business together, and by the way, I have represented people in a situation where they get divorced and remain in the business together. It’s not like, ideal, but it happens.

Michael Levitis  02:46

That no choice because the board has a very integral important part of the business and for the husband, right? They have to work together,

Marina Shepelsky  02:55

it’s a good idea to have your own attorney, look at the paperwork and not have your spouse present. although in reality, when it’s a small business, and it’s a family business, people don’t even, you know, bother with a lawyer at all.

Michael Levitis  03:09

But long run, that’s very dangerous. But at the pay little bit more, of course.

Marina Shepelsky  03:13

Yeah, but if you are getting divorced, or if you’re getting separated, each side should have their own lawyers look at it, look at the property, look at the divorce agreement and advise them separately advise their own interests, because a lot of things come up in business that the other side might not have expected to come up when, you know, when people get divorced, they sometimes at the worst. Yeah. So it’s better to have an attorney who’s not involved to just look at it for you, and another attorney or staff, and just put something together that makes both of you somewhat happy, although no one has ever really happen in divorce. But at least everyone feels it’s fair. They had their own way of looking at it. And it’s more fair. And listen, if you do decide to, you know, divide business, people usually get an appraiser and wrong, they get neutral accounting companies sometimes too. But if both sides agree on a completely neutral expert accounting firm to appraise the business, then it’s much easier to divide. But then, like, a lot of times, like I had one divorce where the husband was a doctor and the wife was a nurse, and she worked with him. And they were using the company money for personal needs, both of them, not just the husband, you know, but then when they were dividing up the business and all its assets, it was difficult to decide how much the business was making because they were using the money not necessarily just for business, but also for themselves first class some renovations were done, you know, in this office, you know, things like that come up. So it’s always better to have So lawyers and appraisal company looking at it and then you know, and then you have to work with them to you have to like sometimes explain,

Michael Levitis  05:06

I feel like even preparing corporate documents like issuing shares, the operating agreement, articles of incorporation, all the all that should be prepared and reviewed by two separate attorneys. So we’re on you have any surprises? Is that right?

Marina Shepelsky  05:22

Absolutely. Absolutely. And sometimes people choose to have, let’s say, one share certificate made out to two names, in which case, you have to decide if you want to take as husbands and wives do you want to take as joint tenants meaning, you know, partners? 50/50. So definitely something worth thinking about, you know, if you are thinking I’m divorced, and a few seems like, nobody is guaranteed not to get divorced, you never know.

Michael Levitis  05:47

So it seems like if you’re entering into business with your spouse, it’s best to contact also a family law divorce attorney just in case for someone to review documents, make sure you’re protected for the future.

Marina Shepelsky  06:05

And it’s also a situation where perhaps a post nuptial agreement is not a bad idea. Oh, a naptual agreement is something that married people can sign. It’s not a separation agreement. It’s just like a prenuptial agreement, but during the marriage, right. So post naptual after the marriage, right. And in that agreement, you guys can spell out that, you know, by the way, this business is a 50/50 ownership. And you don’t even have to say in case of divorce, but basically saying the parties have an intention that this is going to be a 5o/50. Whatever your whatever the breakdown is, you know, that’s also going to be super helpful in case you do end up getting divorced or not. Either way, it’s not going to be a bad thing to have a post nuptial agreement.

Michael Levitis  06:53

Marina, thank you very much. You’re always very helpful to our listeners and our viewers. And I’m looking forward to having more sessions with you. Thank you, and have a great day. Thank you.

Marina Shepelsky  07:01

Bye bye