Divorce can affect almost every aspect of a couple’s life, including the work and businesses they have built together. When a business is involved, separating finances can become a lot more complicated.
A business tends to be an important source of income and a valuable part of the family’s financial picture. Determining what happens to that business can require careful consideration of both spouses’ interests.
Determining the value of a business
One of the first questions may be how much the business is worth. A business valuation considers several different factors to determine what the company is worth. Factors such as:
- Business organization
- Business history
- Products and services
- Marketing
- Finances and facilities
- Personnel and Organization
- The overall financial health of the company
Establishing an accurate value can be especially important when the business is one of the couple’s largest assets.
The ownership structure can also affect how a business is handled during divorce. Because New Jersey is an equitable distribution state, even if one spouse owns the business, the other spouse may still have an interest in a portion of its value. If both spouses own the business, determining how to divide their ownership interests can present additional challenges.
There may be several options for handling a business during divorce. One spouse may choose to buy out the other’s interest, allowing the business to remain under one person’s control. The spouses may also continue to own the business together for a period of time, although this arrangement can require clear agreements about management, finances and decision-making. In some circumstances, selling the business may be another option. The proceeds from the sale can then be considered as part of the division of marital assets. However, selling a business may not always be practical, particularly if it provides the primary source of income for one or both spouses.
When a business is part of a divorce, decisions about ownership and finances may have long-term consequences. Getting legal guidance early can help you understand your options and make informed decisions about your financial future.
