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In this article we will review several prudent practices to protect your business during divorce in New Jersey.
We will review five smart suggestions that could contribute to keeping your business and its assets safe and strong with three additional divorce-focused recommendations. Your attorneys at Townsend, Tomaio & Newmark can elaborate on how these apply to your business and divorce situation and explain equitable distribution parameters in New Jersey, as well. Lastly, we will explain the three most common methods for distributing a business in divorce: Buyout, Co-ownership and Sell.
8 Prudent Practices to Protect Your Morris County Business in Divorce in NJ
1.Agree with your spouse on a pre- or post-nuptial.
2.Maintain good records, and keep your family’s finances separate from those of the business.
3.Pay yourself a good salary.
4.Get fair valuations of the properties using both a neutral, court-appointed valuation professional and one who you hire.
5.Keep comprehensive insurance policies (automobile, health, workman comp., liability, life, theft, hazard, etc.) for the right amounts and stay current with your premium payments .
Smart Suggestions to Legally Prepare Your Business for Divorce in Parsippany NJ
6.If your spouse is actively involved in the business, separate him/her from active participation in the business as soon as possible. The greater his/her role and time in the company, the better chance his/her attorney will make a case that the spouse contributed significantly to build the enterprise and is entitled to benefit from its growth.
7.Get an agreement for you to make any payments to your ex on a regular basis over time.
8.If you are low on cash, raise capital by selling a (minority) stake, possibly to employees in an employee stock ownership plan.
3 Methods to Regain and Retain Control of the Business
Equitable distribution (click here) of property (including debts) is explained here. A first step in this process is to categorize a property and then determine its value. a non-owning spouse’s stake in the business, if any. How would you go about “splitting” this stake? Your attorney at the law firm of Townsend, Tomaio & Newmark working in the communities of Chatham, Mendham, Harding and across Bergen County has profound expertise in this area and will advise you about your specific situation. In the meantime, there are three common methods for distributing a business interest in divorce:
A buyout is the straightforward purchase of your spouse’s stake in the business. The key is for you and your ex to get and agree on a fair and accurate valuation of the business. Be honest and transparent.
It is not a good idea to deliberately undercut the value. If your spouse finds out in the future that the value was (or could have been) more, or that it increased shortly after the divorce, you’ll probably be facing another lawsuit soon that is practically guaranteed to be long and expensive.
By the way, a buyout only works if you have enough cash to pay your spouse or if he/she agrees to a schedule of payments (#6 above). This is called a structured buy out. It can be structured in any manner for any term that is agreeable to both spouses. Your attorney will have suggestions based on lots of experience in this area. A buyout might also be paid through a trade of marital assets, for example, your share of the house for your spouse’s share of the business. The conversion of other liquid assets is another possible option for paying a buyout obligation.
ASK YOUR ATTORNEY at Townsend, Tomaio & Newmark *973-828-0829* how a structured buyout would look for your business, the tax implications of these payments, and if they are covered by the business.
Another way to distribute a business asset in divorce is simply not to distribute it at all. It’s not unreasonable or impossible for both of you to jointly own and continue to run the business together after the divorce. That depends on you and your spouse and if you can establish a productive professional and respectful relationship post-divorce.
An alternative to the joint- or co-ownership option might be for one of you to actually work and run the business, while the other agrees to accept payments from future business proceeds. There could be a risk, though, if the business hits a down season or doesn’t generate a steady profit.
Sell the business
A third option is to agree to sell the business and divide the profit fairly and equitably (not necessarily 50-50). Selling properties is quite common and sometimes the easiest option. For example, it’s common to sell the marital home and for you and your spouse to split the proceeds –especially if one of you is planning to move away.
However, selling a business might sound easier than it is. Business size, brand recognition, and market niche, along with actual and projected profits, are all important factors that could make a quick sell difficult. Market fluctuations can have a serious impact on the value of the business, so take this into consideration as you work together to assess a fair value.
Understand the New Jersey pros and cons to every strategy
These are the most common practices, but there are others. You can opt to use different methods for different assets. Naturally, there are pros and cons to each of these that you will want to understand in full before selecting a method of distribution.
As far as your business is concerned, there’s more to it than just you and your spouse. Having a competent and experienced attorney will give your partners, clients and creditors assurance about a stable future.
Your attorneys at Townsend, Tomaio & Newmark are here to help in both Morris and Bergen counties.
We’ll put our expertise and experience to work to help you to structure the best protections that will ensure that your business comes out of the divorce intact. Contact us online or call us today at 973-828-0829 for a free and confidential consultation. The earlier you prepare your strategy the better chance it will be effective in protecting your business and its corresponding business assets.