Owning a family business can be difficult, but something even more challenging is deciding how it will be divided if you and your spouse divorce. This type of decision can be overwhelming and emotionally complex. To learn more about your options during this time, work with an experienced Morris County, NJ business, property, and investment valuation attorney today.
Are Family Businesses Subject to Property Division?
New Jersey is an equitable distribution state, meaning that all marital assets are subject to fair and equitable division between spouses in a divorce case. But is a family business considered marital property?
In most cases, yes, family businesses are jointly owned and therefore are subject to asset distribution. Any assets acquired during the marriage are automatically considered marital property. If the business was started or bought during the marriage or with the help of marital funds, it is jointly owned.
However, even a separately owned business can become marital property under certain circumstances. If one spouse started the business before the marriage, the other may still have a claim to the property if they contributed in any way throughout the years. This can include money, labor, and other contributions, like sacrificing a career to take care of the home so the other spouse could run the company.
How Will My Family Business Be Divided in My Divorce?
There are several ways that a family business can be divided during a divorce to ensure a fair and equitable split. Consider the following options.
- Sell the business: One of the simplest ways to divide a family business between spouses during a divorce is to simply sell. Once the company has been sold for cash, the proceeds can then easily be equitably distributed between the two spouses like any other asset, depending on the financial situation and other relevant factors.
- Buyout: While selling seems simple, one spouse may want to retain ownership of the business, whether for financial gain or sentimental reasons. In this case, the spouse who wants to continue owning the business can offer to buy out the other. They can purchase the other spouse’s shares or interest in the company.
- Divide the business: In some cases, the business can be divided in order to allow both spouses to maintain a piece of the company. The business’s assets could be split, or the company can be restricted so that each spouse winds up with their own part of the business.
- Co-ownership: It is also possible for both spouses to maintain ownership of the business by simply continuing to co-own and operate the company even after the divorce. It should be noted, however, that the viability of this option heavily depends on the relationship between the spouses and each party’s willingness to cooperate, communicate, and trust the other.
There is no telling which option will be best in your case. The answer will depend on the specific details of the company and your relationship. Because family businesses are so important both financially and emotionally, it is crucial that you fully understand all of your legal rights and options. Reach out to a knowledgeable attorney at Townsend, Tomaio & Newmark, LLC today.
