What happens to the family business during divorce?
Dividing a Family Business in Ocean and Monmouth County Divorce Cases
Educating Clients in financial issues throughout Ocean and Monmouth County towns such as Toms River, Wall, Point Pleasant, Asbury Park, Spring Lake, Brick, and all of Eastern New Jersey
When family business owners begin the divorce process, frequently their concerns are about their financial future and how their assets will be divided. New Jersey is an equitable distribution state. This means that all assets are divided in an equal manner. But it does not mean necessarily that all assets will be split 50-50. If one spouse owns a business before marriage or inherits it, any profits made during the marriage will count as marital property if the increase in profits was a direct result of the active participation of the spouses during that time. In an equitable distribution state like New Jersey, there is no fixed formula for dividing marital assets. This means that acute negotiation skills and knowledge of complex laws are a must in order to reach a fair settlement.
The Bronzino Law Firm has a great deal of experience facilitating a fair and equitable agreement regarding the division of a family business in a divorce. Divorce can be painful and determining who gets what can be exhausting and complicated. Let our knowledgeable team of attorneys guide you through the process to assure you the fairest settlement.
Will I have to give up 50% of my business holdings in divorce?
Not necessarily. Equitable distribution does not always mean a 50/50 split of business assets. Several factors are taken into account such as the length of the marriage, how old each spouse is and whether or not he/she will be able to maintain a similar standard of living as was experienced during the marriage. Any education or special classes that a spouse will need to earn money on their own will also be contemplated.
Also, if one spouse put aside their career or contributed to the marriage through further education or training and a higher salary. The amount of time and money put into the business by each spouse is also important as well as whether or not the business was established before the marriage.
Are some factors more important than others when dividing a business?
Some judges place more emphasis on the length of the marriage and marital lifestyle. For example, spouses ending longer marriages have usually contributed more significantly to a standard of living and given up more individual opportunities to work or study.
How does Equitable Distribution work?
There are three steps:
1. Identify marital property.
Marital property includes assets and debts accumulated during the marriage. Any property or business acquired before the marriage or as the result of an inheritance or gift isn’t included. A spouse who claims that any property the couple owns at the time of divorce is exclusively theirs will have to provide the documentation to prove it. This can be difficult, as separate and marital property are often combined. For example, one spouse might sell a business before the marriage and then transfer the money to a joint bank account during the marriage.
Distinguishing marital property from separate property can be complicated. If you and your spouse disagree about whether a specific property is separate or marital, ask an attorney for advice.
2. Determine the Value of marital property.
When a division of assets is required, the business is assigned a “fair market value” which is equal to the estimated amount of its worth if it were sold. Sometimes real estate specialists or business appraisers must be called in to make a fair judgment. The court also accepts the financial records of a business to demonstrate annual profits. Tax returns are frequently included as well.
3. Distribute Marital Property
There are many options in the distribution of marital assets. A couple can decide to co-own the business and continue working together. If the divorce is amicable, this is a good option. Another option is to sell the business to a third party and divide the proceeds after debts related to the business have been paid. A third option is for one spouse to buy out the other. Typically, this option can be challenging due to a lack of liquid assets belonging to one spouse which would be necessary for the buyout.
This looks complicated. What should I do?
The first thing you should do is not panic. The process of going through a divorce is complicated and can be confusing. You need a family attorney with the experience and knowledge to guide you through the process and make sure your assets are fairly distributed. There are many factors to consider and other experts may be needed. At the Bronzino Law Firm, we are prepared to make your transition as smooth and expeditious as possible.
Consult with a Divorce and Business Valuation Attorney in Brick or Sea Girt NJ Today
At the Bronzino Law Firm, we are ready to help you with your divorce settlement concerns. Let us help you obtain a division of assets that is fair to both you and your spouse. To speak with our offices today in a free consultation about your divorce, fiances, and division of a family business issues, please contact us online or through our Brick or Sea Girt offices at (732) 812-3102.