Divorcing as business owners can be quite complex especially when it is time to figure out how to best split your assets. Aside from the emotional aspect, you also have to deal with the professional side of it.
In this blog post, we will guide you through what happens to a family-owned business during divorce.
How are assets like businesses divided in New Jersey?
In New Jersey, the court will seek to divide the couple’s marital property fairly, but not necessarily 50/50. This is known as equitable distribution.
Any business that either party built or bought during the marriage is likely marital property. This means that even if only one spouse is the legal owner, the other spouse may still be entitled to a share.
Separate property can also become marital property through commingling. For example, you purchased your business before getting married. Over the course of your marriage, you may have used marital funds to help improve your business. Mixing your assets in this way could mean that your spouse has a claim on a portion of the company.
How can financial experts help?
To divide a business fairly, the court will need to establish the value of the business. The court grants a high level of consideration to expert testimonies when it comes to assessing business-related disputes.
Seeking the help of experts to review your family enterprise’s financial records is crucial during this process. The appraisers may include Certified Public Accountants (CPAs), business valuation analysts, tax professionals and real estate appraisers depending on your company’s holdings.
What happens after the business appraisal?
Once the appraisal is complete, the divorcing couple will choose from one of three methods of business division:
- Buyout: In this case, one spouse will purchase the business shares of the other and become the sole owner of the entity.
- Co-ownership: In this case, the ex-spouses will keep the asset and continue to run it as business partners, post-divorce.
- Sale of business: In this case, the ex-spouses will sell the business and divide the profits equally.
With the guidance of a dedicated family law attorney, reaching an amicable settlement with your business division can be handled promptly and with finesse.
