Going through a divorce is never easy. If you or your spouse own a business together, the process can become even more complicated. Dividing a business in a divorce is one of the most complex aspects of family law in New Jersey, and understanding how courts approach this situation is crucial to navigating your case effectively. If you are facing a divorce involving a business, you may feel overwhelmed and unsure of where to turn. It’s perfectly natural to experience confusion and worry during such a challenging time. Rest assured, you are not alone. Our firm is here to help guide you through this process with care, compassion, and a deep understanding of the legal intricacies involved.
What Does “Dividing a Business” Mean in Divorce?
In New Jersey, the division of assets in a divorce is governed by the principle of equitable distribution. This means that the court seeks to divide the couple’s property fairly, but not necessarily equally. When a business is involved, the question of how to divide it can be tricky. Businesses, whether they are small companies or larger enterprises, are often considered marital assets if they were started or developed during the marriage. The court will need to determine the value of the business and decide how it should be split between both parties.
Determining the Value of the Business
One of the first steps in dividing a business in a divorce is determining its value. Valuing a business is a complex process that requires a detailed analysis of various factors. This process often involves the use of professional appraisers, accountants, or financial experts who assess the business’s worth. The court looks at a range of factors, including the company’s income, assets, liabilities, and potential for future growth. Additionally, the contributions made by both spouses, including time, money, and effort, will be taken into account. A business may not be treated as a simple financial asset, especially if one spouse has been significantly involved in running or growing the business.
Consideration of Separate and Marital Property
New Jersey is an equitable distribution state, meaning that all assets acquired during the marriage are typically divided between the spouses in a fair manner. However, the business may also have elements of both marital and separate property. For instance, if one spouse started the business before the marriage, that portion of the business may be considered separate property. On the other hand, any increase in the value of the business that occurred during the marriage may be subject to division. This can create a complex situation where the court needs to carefully separate the growth of the business that occurred during the marriage from its original value.
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
Options for Dividing the Business
Once the value of the business has been determined, the court will consider how best to divide it. There are several options for how a business may be divided in a divorce, depending on the specific circumstances of the case.
One option is to sell the business and divide the proceeds. If neither party wants to continue operating the business, selling it may be the simplest solution. However, selling a business can be a lengthy and expensive process, especially if it involves negotiations with potential buyers.
Another option is for one spouse to buy out the other spouse’s interest in the business. This can be a practical solution if one spouse wants to keep the business running and is able to pay the other spouse for their share. However, the buyout process can be complicated, particularly if there are disagreements over the value of the business or how the buyout should be structured.
In some cases, the business may remain intact, with both spouses continuing to have an ownership interest. This option can be difficult to navigate, as it requires ongoing cooperation and communication between the spouses. If the spouses are unable to work together, it can lead to further legal complications.
I was very fortunate to find Tanya online during an urgent family matter. I was able to speak with her on our situation and she immediately jumped on the case the same day. I was impressed at her knowledge and her team as they were able to answer questions on the spot and navigate through an unpleasant situation. Her honesty and responsiveness have made this process much easier, and the support she has provided has truly gone above my expectation of a family law firm. This is truly an exceptional firm & I would highly recommend.” - Lydia Martinez My father recently hired Tanya Freeman; Family Law Attorney and her team as a replacement to handle his divorce which has been going nowhere for over 3 years with a different attorney. Tanya and her team have done so much within just a few months for his trial and has given my father a new sense of hope. The team is always quick to respond to any questions. The case is still ongoing, however, my father has newly restored confidence that he will be treated fairly and with his best interest in mind. We definitely recommend Tanya Freeman; Family Law Attorney." - Molly Howard Tanya is an outstanding attorney! Her attentiveness to detail and willingness to be honest with her clients means you’re going to get the best possible outcome for your case. She and her team went above and beyond, making sure my divorce and custody case ended neatly and in the best interest of my children. Her pricing is reasonable and she’s willing to work with you. I highly recommend Tanya Freeman to anyone going through a divorce or family law case!" - Jenifer Mckinney
How a Business Owner’s Role Affects the Division
In a divorce involving a business, the role that each spouse played in the business is also an important factor. If one spouse was primarily responsible for running the business while the other played a more passive role, this may affect how the business is divided. Courts consider the contributions made by each spouse, including whether one spouse was more involved in the day-to-day operations, or if both spouses were equally responsible for the growth and success of the business.
The court may also look at any agreements that were made before or during the marriage, such as prenuptial agreements, which could affect how the business is divided. If such agreements exist, they could clarify the ownership and division of the business in the event of a divorce.
Protecting Your Business Interests
If you own a business and are facing a divorce, it is crucial to take steps to protect your interests. One of the most important things you can do is to have a clear understanding of the business’s value. Work with a skilled financial professional or appraiser to get an accurate assessment of the business. This can help you avoid any surprises during the divorce process and ensure that you are fairly compensated for your share of the business.
Additionally, consider whether a prenuptial agreement or postnuptial agreement could be helpful. These agreements can set out clear guidelines for how your business will be treated in the event of a divorce, providing added protection for your interests.
Related Videos
The Role of Legal Counsel
Navigating a divorce involving a business requires careful attention to detail and a thorough understanding of both family law and business valuation. Working with an experienced attorney who understands the complexities of dividing businesses in divorce is essential. Your attorney can help you negotiate with your spouse and their legal team, ensuring that your interests are protected. They can also advocate on your behalf in court if necessary.
At our firm, we understand the stress and emotional strain that comes with complex divorces. We are committed to helping you through every step of the process, from valuing your business to ensuring a fair division of assets. Our goal is to help you achieve a positive outcome that protects your financial future and sets you on a path toward a fresh start.
If you are facing a divorce involving a business, don’t navigate this challenging process alone. Our firm is here to offer the legal support and guidance you need. We will work closely with you to ensure that your interests are protected and that you receive a fair and just resolution. Contact Tanya L. Freeman, Attorney at Law today to schedule a consultation. Let us help you move forward with confidence during this difficult time.