Here in New Jersey, entrepreneurs play a critical role, with nearly a million small businesses in the state, according to the U.S. Small Business Administration. For New Jersey business owners, divorce can be a complex undertaking. The process involves assessing the value of the business and choosing the most suitable method for separating ownership interests.
The decision impacts both spouse’s personal and financial lives. Understanding how this process works is important for business owners who are undergoing divorce.
Separation of assets
In New Jersey, business ownership interests can be subject to division during divorce if they are marital property. This applies to businesses established during the marriage, even if only one spouse was actively involved. Separate property can become marital property if commingled with marital assets.
Understanding each spouse’s role in the business is critical in determining how to divide the company. If only one spouse continues as the business owner post-divorce, the other spouse might receive a larger share of non-business assets to compensate.
Determining the value of a business in a divorce is a complicated process. It involves assessing physical and intellectual property, debt, income and market comparisons. Often, financial experts assist with valuing the business accurately.
Dividing business ownership
There are three primary ways to handle business ownership interests in a divorce. The first is a buyout, in which one spouse buys the other’s stake in the business. The buyout is usually done at fair market value, typically in cash or equivalent marital assets.
Another approach is liquidation. The owners can sell the company if a buyout is not possible or desirable. The proceeds from the sale are then divided equitably between the spouses. Continued joint ownership is also an option. In some cases, ex-spouses may choose to continue co-owning the business. This approach works if they can operate the business amicably post-divorce.
Navigating a divorce as a business owner in New Jersey requires careful consideration of how to divide business assets.