Divorce can be a complicated process, and when business ownership is involved, the complexities only increase. In New Jersey, divorces that include business interests present unique challenges, both emotionally and financially. The process of dividing assets in a divorce is never simple, but a business adds an extra layer of difficulty. Whether you are a business owner or your spouse owns a business, it is important to protect your rights during the divorce proceedings. At, Tanya L. Freeman, Attorney at Law , we are here to guide you through the legal process and help you navigate the complexities of your case.
Understanding how New Jersey law handles the division of a business is essential for anyone going through a divorce. Business ownership raises questions about the value of the company, whether the business was started before or during the marriage, and how it should be divided. This page will explore these issues in detail, ensuring that both business owners and their spouses are informed about their rights and responsibilities in a New Jersey divorce.
How New Jersey Courts View Business Ownership in Divorce
When it comes to divorce in New Jersey, the courts follow a principle known as “equitable distribution.” This means that marital assets, including business interests, will be divided fairly, but not necessarily equally. In cases where a business is involved, determining what is fair can be a complex process.
A key factor in determining how a business is treated in a divorce is whether it is considered marital property or separate property. Marital property includes assets acquired during the marriage, while separate property refers to assets obtained before the marriage or through inheritance or gifts. If the business was started before the marriage, it may be considered separate property. However, if the business grew in value during the marriage, the increase in value may be subject to equitable distribution.
The court will also look at factors such as each spouse’s contribution to the business, whether one spouse sacrificed their career to support the business, and how the business contributed to the family’s financial well-being. In cases where both spouses were involved in the business, the division of ownership can become even more complex.
More than an accomplished divorce and family law attorney, Tanya L. Freeman, is a consummate professional with a wealth of corporate and life experience. Known as a leader and strategist, Tanya L. Freeman was appointed by the Governor of New Jersey as Chair of the Board of Directors of the University Hospital in Newark, New Jersey. Tanya L. Freeman also presents among the ranks of public speakers. She captivates and inspires professional groups nationwide. "Tanya has the eloquence and oratory brilliance with the ability to forge deep connections with her listeners."
Tanya L. Freeman, Attorney at Law
Managing Partner of the Family Law Practice at Callagy Law
Valuing a Business During Divorce
One of the biggest challenges in a divorce involving a business is determining its value. The court will need to assess the value of the business before deciding how to divide it. There are different ways to value a business, and the method used can significantly impact the outcome of the divorce.
One common method is the income approach, which looks at the business’s future earning potential. Another method is the market approach, which compares the business to similar businesses that have recently been sold. Lastly, the asset approach considers the value of the company’s assets minus its liabilities.
Once the value is determined, the court will decide how the business should be divided. In some cases, the court may award the business to one spouse and compensate the other spouse with other marital assets. In other cases, the court may order the business to be sold and the proceeds divided between the spouses.
Protecting Your Business Before and During Divorce
For business owners, it is important to take steps to protect the company during a divorce. One of the best ways to do this is by creating a prenuptial or postnuptial agreement. These agreements can outline how the business will be treated in the event of a divorce, potentially avoiding lengthy and costly disputes.
If you did not create such an agreement, there are still steps you can take to protect your business. It is crucial to keep clear records of your business finances, including separating business and personal expenses. This can help demonstrate that the business is separate property or that certain assets should not be subject to division.
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During the divorce process, it is important to avoid making any major changes to the business. The court may view actions such as transferring ownership or selling business assets as attempts to hide money from your spouse. These actions can negatively impact the court’s view of your case.
It is also important to consider the emotional toll that a divorce can take on your business. Running a business is time-consuming, and the stress of a divorce can distract you from managing the company effectively. Surrounding yourself with a supportive team of advisors, including legal and financial professionals, can help you navigate the process without jeopardizing the business.
The Role of a Forensic Accountant in Divorce
In divorces involving businesses, it is often necessary to involve a forensic accountant. A forensic accountant is a professional who can investigate and analyze the financial aspects of the business to ensure that all assets are accurately valued and reported.
Forensic accountants play a crucial role in determining the value of a business, uncovering hidden assets, and analyzing financial statements. They can also help ensure that one spouse is not attempting to manipulate the business’s finances in order to gain an advantage in the divorce.
Hiring a forensic accountant can be particularly important if you suspect that your spouse is not being truthful about the business’s finances. In cases where one spouse has more control over the business, there may be concerns about financial transparency. A forensic accountant can help level the playing field by providing an objective analysis of the business’s value and financial health.
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Challenges Faced by Spouses Who Do Not Own the Business
If you are married to a business owner, it is important to understand your rights during a divorce. While you may not be directly involved in the day-to-day operations of the business, you may still have a claim to a portion of its value.
One of the challenges faced by spouses who do not own the business is gaining access to accurate financial information. In many cases, the business owner has more control over the company’s financial records, making it difficult for the other spouse to assess the value of the business.
It is important to work with a legal team that has experience handling divorces involving businesses. They can help you obtain the necessary financial documents and work with specialists to ensure that the business is valued accurately. This will help protect your interests and ensure that you receive a fair share of the marital assets.
Common Solutions for Dividing a Business
There are several ways that New Jersey courts may choose to divide a business during a divorce. In some cases, one spouse may buy out the other spouse’s interest in the business. This allows the business to remain intact while providing the non-owner spouse with compensation for their share of the marital assets.
In other cases, the court may order the business to be sold, with the proceeds divided between the spouses. This option may be necessary if neither spouse has the financial resources to buy out the other or if the business cannot continue to operate without both spouses’ involvement.
Another possibility is co-ownership, where both spouses continue to share ownership of the business after the divorce. This option is rare, as it requires both parties to maintain a working relationship, which can be challenging after a divorce. However, in cases where both spouses were actively involved in running the business, co-ownership may be a viable solution.
Going through a divorce is never easy, and when a business is involved, the stakes are even higher. It is important to understand your rights and take steps to protect your interests, whether you are the business owner or the spouse of a business owner. By working with experienced legal and financial professionals, you can navigate the complexities of a business divorce and ensure that your financial future is protected.
If you are facing a divorce in New Jersey and need assistance with issues involving business ownership, Tanya L. Freeman, Attorney at Law, can help. Our firm is experienced in handling divorces that involve business interests, and we will work diligently to protect your rights throughout the process. Contact us today to schedule a consultation and learn more about how we can assist you in securing a fair resolution to your divorce.