Divorcing a Spouse Who Is Also a Business Partner in NJ
When you divorce, unless a valid premarital agreement specifies otherwise, all marital assets are subject to division. Marital property–meaning anything acquired since the marriage began–will be divided between the parties in accordance with the principles of equity and fairness. Property is broadly defined, including standard assets such as bank accounts and real estate but also stocks, retirement accounts, and business ownership interests. What happens if you and your spouse are business partners? What happens to the business upon your divorce? What are your options? Continue reading for a discussion of divorcing your business partner in New Jersey. If you need help dealing with a complex business asset in your New Jersey divorce, call a dedicated divorce and property division attorney at the Union Law Offices of John B. D’Alessandro for assistance.
Business Ownership Is Property
All marital property is subject to equitable division upon divorce unless otherwise agreed to in writing. If you started a business after the marriage began, the business counts as marital property. If you were already a part of the business when you got married, the increase in value to the business might also be treated as a marital asset. Certainly, if the spouses are both partners in the business, the business will be deemed marital property. Upon divorce, then, the parties will have to decide whether and how to divide up and distribute the business ownership interests.
Valuing the Business
The first step in dividing a business upon divorce is valuation. Whether the parties will both continue owning the business or opt for some other means of distribution, it’s important to know what the business is worth. New Jersey courts will look to the “fair value” of the business, typically as determined by a business valuation expert.
There are many different ways to evaluate the worth of the business. The expert may consider the price the business would fetch if sold, including by comparing the sale of similar businesses in recent years. Because closely held businesses typically do not have a ready market, this might be difficult to evaluate. The expert may also look at capitalization of income, discounted cash flow, the company’s tangible property (real estate, equipment, cash), intangible property (customers and business reputation), liabilities, and other items. The parties to the divorce may provide competing valuations, depending upon their interests and intentions for distribution.
Determining Equitable Distribution
Not all marital assets are distributed equally to both parties in a New Jersey divorce. In determining the distribution of a family business in divorce, the court will consider a number of factors, including:
- The length of the marriage
- Each spouse’s professional contributions to and general involvement with the business
- Distribution of the remaining marital assets
- Each party’s capacity to earn income outside of the business
Options for Division
The parties and court will then need to decide whether and how to actually divide up the business, based on the valuation and determination of distribution. Typically, there are three primary options:
One spouse buys out the other. Most commonly, the parties will agree to allow one party to buy the other party’s interest in the company. A buyout makes sense when one party has a greater involvement with the company, allowing them to continue to run the business without impediment.
The parties continue as co-owners. If the parties believe they can continue to run the company together despite their divorce, they can choose to simply remain business partners. The parties might not need to shift the ownership interests at all, depending on the circumstances.
Sell the business. If the parties cannot agree on a buyout or continue as co-owners, they can choose to sell the business. The parties will split the proceeds based on the agreed-upon amount or a court-determined distribution.
Call a Knowledgeable New Jersey Property Division Lawyer for Seasoned Advice and Effective Representation
If you’re considering divorce, or if you’re dealing with issues involving financial disclosures, equitable division of property, alimony/spousal support, child support, or other family law matters in New Jersey, contact the experienced and compassionate Union family law attorney John B. D’Alessandro for a consultation.