What Happens to a Business in a New Jersey Divorce?

Divorce is rarely simple, and when a business is involved, the situation can become even more complicated. For many couples, a company is not just an asset but also a livelihood and a source of identity. In New Jersey, the way a business is treated during a divorce depends on several legal and financial considerations. If you are a business owner, or your spouse owns a company, continue reading and reach out to our divorce lawyers in Sussex County to learn more about these cases and how our firm can help you. Here are some of the questions you may have:

How Is a Business Valued During Divorce?

One of the first questions in any divorce involving a company is how much the business is worth. Courts typically require a thorough valuation conducted by a qualified expert. This process may involve examining financial records, profit and loss statements, assets, debts, and future earning potential. The goal is to reach a fair estimate of the business’s market value.

There are several methods for valuation, and the one used can make a significant difference in the final number. For example, the income approach looks at the business’s ability to generate revenue, while the market approach compares the company to similar businesses that have recently been sold. Because valuation is complex and often disputed, having an experienced attorney guide the process is crucial.

Is a Business Considered Marital Property?

Whether a business is subject to division depends on when and how it was established. If the company was created during the marriage, it is generally considered marital property. In that case, both spouses may have an interest, regardless of who ran the day-to-day operations.

If the business existed before the marriage, things may be different. A court may determine that only the growth or increase in value that occurred during the marriage is subject to equitable distribution. Even then, the non-owner spouse might have a claim, especially if they contributed in ways that supported the business’s success. Contributions could include direct work for the company or indirect support, such as managing the household while the other spouse built the business.

What Options Exist for Dividing a Business?

Once the business has been valued and classified as marital property, the question becomes how to divide it. In New Jersey, courts strive for equitable distribution, which does not always mean a 50-50 split. Instead, the goal is to reach a fair outcome based on the couple’s unique circumstances.

In many cases, selling the business and dividing the proceeds is not practical or desirable. Instead, one spouse may buy out the other’s interest, often by offsetting the value with other assets like real estate or retirement accounts. Sometimes, spouses choose to continue operating the business together, though this arrangement requires trust and cooperation that may be difficult after a divorce. Another possibility is a structured payout over time, allowing the business owner to keep control while compensating the other spouse gradually.

If you have further questions about divorces involving businesses or you need a knowledgeable legal team in your corner, simply contact Gruber, Colabella, Thompson, Hiben & Montella today.