Understanding Strategies to Address Family Business in New Jersey Divorce

When a couple divorces and a family business is part of the marital estate, unique legal, emotional, and (particularly) financial complexities arise. Whether the business was jointly run, inherited, or managed by one spouse, its fate must be carefully addressed during the course of New Jersey divorce proceedings. There are some specific strategic considerations when navigating a family business in New Jersey divorce.

Determine Whether the Business is Marital or Separate Property

The first step is to classify the family business as either marital or separate property. There are a number of facts and factors that come into play when determining whether a particular business will be considered marital or separate property:

• When the business was started (before or during the marriage)
• How the business was funded
• Whether marital funds or joint efforts contributed to its growth
• If the other spouse played a role in operations or management

Even if one spouse founded the business before the marriage, the enterprise might be considered partly marital if the other spouse contributed labor, resources, or strategic support.

Obtain an Accurate Business Valuation

When dealing with family business in New Jersey divorce, obtaining a third-party valuation can be critical. This step establishes the fair market value of the business. The valuation directly influences equitable distribution during a New Jersey marriage dissolution proceeding. A certified business appraiser considers a variety of factors that include:

• Tangible assets (equipment, inventory, property)
• Intangible assets (brand value, goodwill, customer base)
• Debts and liabilities
• income projections

Choosing an experienced professional familiar with divorce matters is essential when it comes to the matter of a business valuation. There are a number of valuation methods that can be used that include:

• Income approach
• Market approach
• Asset-based approach

Explore Buyout Options

A common resolution during divorce is for one spouse to buy out the other’s share of the business. This process requires:

• Agreement on the business’s value
• A fair calculation of the purchasing spouse’s ability to pay
• Potential installment plans or structured settlements

Buyouts allow one spouse to maintain control and continuity. At the same time, it permits compensating the other spouse for their share. In some cases, other marital assets may be used to equalize the division.

Consider Co-Ownership Carefully

Co-ownership after divorce is not extremely commonplace. However, it is possible if the former spouses are able to establish and maintain a functional working relationship post-divorce. This strategy may be appropriate when:

• Both parties are actively involved in day-to-day operations
• The business’s success relies on their unique partnership
• Children or other family members are being groomed to take over

Keep in mind that this arrangement requires clearly defined roles, a partnership agreement, and a contingency plan if disputes arise. It works best when both spouses prioritize the business’s longevity over personal conflict.

Sell the Business and Divide the Proceeds

If neither spouse wishes to keep the business, or if it’s financially impractical for one to do so, selling the company and splitting the proceeds may be the most appropriate course of action. Examples of when this may be appropriate when dealing with family business in New Jersey divorce:

• The business can be easily transferred or sold
• Neither party has the means to buy out the other
• Continued joint ownership is unfeasible

Though selling provides finality, it can also prove to be disruptive. This especially is the situation if the business has been in the family for generations. Emotional readiness to let go is just as important as financial readiness.

Protect Confidential Business Information

During divorce, discovery processes may require sharing sensitive business data. Steps should be taken to protect proprietary information, trade secrets, and customer lists. This may include steps that include:

• Using confidentiality or non-disclosure agreements
• Sealing portions of the court record
• Limiting document access to essential parties

If the divorce becomes contentious, one spouse might attempt to use business records as leverage. Proactive legal protections help ensure that business operations are not harmed by litigation tactics.

Plan for Tax Consequences and Long-Term Stability

Finally, when it comes to a family business in New Jersey divorce, dividing a business has tax implications. For example, buyout payments may trigger capital gains or other tax liabilities. Professional advice from accountants and tax attorneys is essential when:

• Structuring buyouts or installment payments
• Transferring shares or business assets
• Selling the business

Keep in mind that it is also important to consider how the post-divorce structure impacts the business’s stability, employee retention, and client relationships. Clear communication and transition plans can help preserve value and ensure continuity. If you have any questions regarding a New Jersey divorce involving a family business, call the Law Offices of Peter Van Aulen at (201) 845-7400 for a free divorce consultation today.