The majority of the time, couples do not expect to get divorced when they are getting married. However, divorce is common. When it happens, the process entails splitting the life two spouses built together. This requires their assets to be divided between the two of them. While this process is often very complex, it can become more difficult in the event that there is a business in the marriage. These situations require the court to determine the status and value of the business to establish a fair distribution. During this time, it is important to contact an experienced attorney who can protect your business and its worth.
Marital Property vs. Separate Property
Couples who go to court to separate their assets relinquish their right to make the decisions. Doing so allows the judge to take over this process and determine which assets end up with whom. In order to come to a conclusion, the judge has to deem what is marital property and what is separate property:
- Marital Property: Assets acquired and or converted into both spouses’ property throughout the marriage
- Separate Property: Assets acquired before and agreed to stay separate throughout the marriage
If a business is deemed marital property, it is important to know that it is subject to equitable distribution. This means that the business’ worth will be divided by the judge in a way that is fair and just to both spouses.
How is a Business Valued?
In order for a business to be distributed to both spouses, it must first be valued. This starts with defining the business, which allows the court to understand what assets are available to the spouses and what shares are owned by other people. For example, companies that are privately-owned are usually at least partially owned by family members or spouses. Other public companies might have shareholders. In order to determine the exact value of the business, a valuation expert can analyze business records as well as practices and expenses. Throughout this process, the court may also request further information about the business owner’s finances.
When valuing a business, it is important to understand how its value can impact the couple’s marital issues. This can consist of the distribution of other assets, child support payments, and alimony. A spouse’s financial gain can affect these matters, which is why the court needs a full understanding of their situation. If a spouse did not contribute to the business’ growth, they may be entitled to a lesser percentage of it.
Protecting a Business
It is important to know there are ways to protect a business. This can be done by drafting a shareholder agreement, a prenuptial agreement, or a postnuptial agreement. A shareholder agreement designates ownership and each party’s stake in the business. A prenuptial or postnuptial agreement determines how the business would be divided if the couple divorced.
Contact our Firm
If you require strong legal representation for matters related to divorce or family law, Haber Silver Simpson & Russoniello is here to help. We proudly represent clients in Morris County and throughout the state of New Jersey. Contact our firm today to schedule a consultation.