New Jersey Business Divorce Lawyers
Representing New Jersey clients who own businesses when divorcing
Some divorces are complicated by a business. If a business is considered marital property, it will be a factor in the division of assets.
Is a business marital or separate property?
Before a court can decide on how to split assets, they must decipher between marital and separate property. Marital property is any asset acquired during the marriage, or agreed to be marital property at the beginning of the marriage. Separate property is any asset acquired before the marriage, gifted assets, inheritance unless commingled with joint assets or any other asset agreed to stay separate through a written agreement. If a court decides a business is marital property, it will be distributed in an equitable fashion. Equitable means fair and just but not necessarily split equally. Even when a business starts out as separate property, commingled finances and the appreciation of a business where the other spouse helped or had a hand in the success alters what was once a definite separate property requiring analysis to determine what percentage should be distributed to the other spouse.
If your business falls under marital property and the issue is contested, valuation takes place in order to assign the asset a monetary value. When facing valuation, a business owner has a lot to consider. New Jersey courts may order an inquiry into the finances of the business. Financial experts will scrutinize business practices, including records and bookkeeping. In order for the court to establish a clear picture of how the business functions, other financial documents may be required as well. If there are discrepancies, the court is a mandated reporter to the Internal Revenue Service and your business could be audited.
Protecting your business
There are ways to protect your business from the divorce process. One way to protect your business is to draft and sign a prenuptial agreement that details what happens to the business when a divorce is a reality. Though couples would rather not face the idea of divorce at the beginning of their marriage, it is smart to protect yourself from unforeseen circumstances. If the business is jointly owned, it would be in everyone’s best interests to draft a durable shareholder’s agreement. This allows for divorcing couples to have a mechanism for valuing each party’s interest in the company, assign ownership, and limit the transfer of ownership to other parties. With these two strategies, the prying eye of the court can generally stay out of the business.
Contact a New Jersey law firm to protect your business
When divorce impacts a family business, owners have a lot to consider. Having the right representation with the skill and knowledge to effectively advocate on your behalf is always in your best interests. If you need legal advice or our passionate counsel, contact The Salvo Law Firm.