Family businesses are shining examples of the American dream in action. Often, they represent a lifetime of hard work and sacrifice and serve as a great source of pride for their owners. This is why learning that your family business may be subject to division during divorce can be so devastating.
Will your business have to be divided? If so, what would that mean for the business, your family, and your future? If you're considering ending your marriage and are concerned about how a divorce could affect your family business, here's what you need to know—as well as how a savvy NJ divorce and family law attorney can help protect your rights and assets.
When a Family Business Is a Marital Asset
New Jersey is an equitable distribution state, which means that in a divorce, marital assets are divided fairly, if not evenly. The state considers a family business to be a marital asset if it was started, acquired, or substantially increased in value during the marriage.
Even if a business started out as a separately-held asset, that doesn't necessarily guarantee that it will be spared from distribution in a divorce. A separate business asset can become a marital asset in the eyes of the court if the spouse without ownership can demonstrate their efforts directly contributed to its success. An attorney will advise you as to whether any of your separately-held business assets may be at risk.
Valuing a Family Business
Before a business can be equitably divided, it must be assigned a “fair value” by a business valuation expert. This valuation is essential to the fair distribution of marital property.
Unlike “fair market value”—which is determined by supply, demand, and other market forces— “fair value” refers to an asset's actual, fundamental worth. An experienced attorney will recommend a variety of qualified business property and investment valuation experts who can help determine the “fair value” of your family business.
Common Business Asset Division Options
Once the business is deemed a marital asset and assigned a fair value, you and your spouse have some decisions to make about what comes next. Options include:
- Continuing to own the business together, even after the divorce. This can be a workable choice for former spouses who remain on good terms. However, it's wise to consider other options before making this decision, as feelings may change over time and joint business ownership might become difficult.
- Selling the business and splitting the proceeds with your ex-spouse. Though this option means giving up the family business you've worked so hard to build, the silver lining is that it provides you with the opportunity for a fresh start.
- Buying out your ex-spouse's share of the business and operating it without them. Buyouts, which can be structured to meet your needs, are a particularly popular option due to the flexibility they provide both parties. For example, a spouse may choose to trade their share of the business for another marital asset, purchase their former spouse's share on a payment plan, or negotiate an alternative buyout agreement relevant to their specific situation.
Protect Your Family Business During a New Jersey Divorce
If you're concerned about how divorce could affect your family business, it's important to consult a knowledgeable Flemington, NJ divorce attorney who can review your case and recommend solutions based on your personal and professional goals.
At Carl Taylor Law, our skilled attorneys Carl Taylor and Lisa Stein-Browning have extensive experience resolving business ownership issues between divorcing spouses. We can help you understand your legal rights and options, and negotiate an equitable division of your business that protects your rights.
Want to learn more about how we can help you and your family business survive divorce? Contact us today to schedule an appointment for a private consultation.