When people think of property that will have to be divided or shared between spouses, they think of homes, cars, furniture, bank accounts, or other similar types of property. But what about your business? Many people do not think of a business as being property that is subject to being divided in a divorce.

Not on Title to the Business?

This is especially true where one spouse is not on the business title or registration as an owner or officer or even where one spouse seemingly did nothing to help the business run, operate or be successful. Yet, even when this is the case, the business that is owned by one spouse can still be considered marital property, subject to division by the family law courts.

Courts recognize that you do not have to physically work for a business to contribute to its success.

A spouse who stays home, raises children, takes care of the family home, or forgoes their personal professional advancement opportunities, is making a sacrifice and contributing to the success of the business, the same way he or she would if he were actually working at or for the business.

Marital or Non-Marital?

A business held or owned by one spouse before the marriage, may be more likely to be considered non-marital property, thus not subject to division—but again, if a spouse made sacrifices so the business can succeed, or if the business’ assets and debts were intermingled with the couples’ personal finances, then the business could be marital property.

This often happens when, for example, the married couple uses their own money to “loan” to the business or when business debts are paid by the couple’s personal assets or accounts.

Valuing the Business

If a business is considered marital property, the next step is getting its value.

Naturally, it may be in a party’s best interest for the business to be worth as little as possible. There are many ways of valuing businesses—current value, based on accounts receivable, based on future prospects, or based on the value of inventory or property owned.

Dividing the Business

Once the value is determined, the couple then has two choices: The business could be liquidated, and closed, with the married couple taking the proceeds as determined by the judge. Or, one spouse can continue running and owning the business, and paying out in cash (or through other assets) the part of the business that belongs to the other spouse.

If the parties are on good enough terms, they could opt to continue to jointly run the business, and continue to divide proceeds—but that does take a significant amount of interaction between (what will be ex) spouses, which may not be desirable.

Equitable Division

When determining who gets what, as with any marital property, there is not an automatic 50-50 split between the spouses. Rather the court will look to the parties, their needs, their contributions to the family, marriage and business itself, and make a determination of what is a fair division between them.

Contact our New Jersey family law and divorce attorneys at The Law Office of Agnes Rybar LLC today with questions about the division of property in your divorce or separation.





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