One of the most commonly asked questions during a divorce is “what will happen to my business?”. Small business owners know just how much work it takes to grow a company, to keep it afloat through uncertain economic times, and just how fragile the company can be. Something as tumultuous as a divorce can easily pose a serious risk to the survival of any family business. Barring the existence of a prenuptial agreement, here are some things to consider when talking about divorce and business ownership.
Is the Business Considered to be a Marital Asset?
The first question that must be answered is whether or not the business in question is in fact subject to New Jersey’s equitable distribution of assets statute. That is to say, is the business considered community property (an asset of the marriage) or separate property (an asset of an individual spouse)? The answer isn’t always clear-cut, and is one area where an experienced Morris County Divorce Lawyer can provide a significant advantage to one party. As a general rule however, even if the business were owned by one spouse prior to the marriage, any earnings, growth, or investment into that business after the marriage will be considered community property.
How Much is the Enterprise Worth?
Determining the value of a family owned business is a necessary part of the division of assets process. Hiring the right attorney who retains a variety of business property and investment valuation experts is key. At Townsend, Tomaio & Newmark, we understand the drain that this process can pose to an individual and a business, both financially and in terms of time spent. Our Family Law firm has offices conveniently located in Morristown and Hackensack; and several of our New Jersey divorce lawyers focus primarily on complex property division in a divorce. We work with qualified industry professionals to pursue accurate valuation of marital assets.
Is the Business Jointly Owned by the Spouses?
There are a number of options available for the fair division of assets for a jointly owned business. The parties can agree to a buyout in which one spouse retains ownership of the company while the other is financially compensated. A flat buyout can be negotiated, or even a payment plan over a period of time. These plans can account for future growth of the business by offering equity or a percentage of profits.
Another option would be a separation clause in which various divisions of the business are given separately to the two parties. This option makes the most sense when dealing with larger companies, as the different parts of the business are more likely to survive and function on their own when compared to a smaller business.
The last option here would be remaining business partners with your spouse after the divorce, but this is not a common or recommended option unless both parties are confident that the business will remain the top priority and committed to maintaining a positive working relationship in the future.
Finding the Right Representation for You
Regardless of the circumstances of your divorce, it is highly recommended that you retain experienced counsel when considering the division of your assets in a divorce. Our lawyers at Townsend, Tomaio & Newmark understand the blood, sweat and tears you have shed to make your business what it is today, and will fight expertly to negotiate the best possible settlement for you and your business. If you are considering a divorce, or in the process of divorcing, contact our Morris County offices today for a free consultation.