Making the decision to divorce may seem like a very intimate and personal matter, but it also relates back to your business. What happens in a divorce can play a role in whether you maintain ownership or face various other business-splitting options. In all cases, the value of your business matters in a high-asset divorce in NJ.
By hiring a Toms River divorce lawyer from Zeigler Law Group, LLC, you gain the confidence you need to ensure the proper valuation of a business that is part of your divorce. Set up a consultation to discuss your situation with our team before you move further into the divorce process.
Why Business Valuation Matters in a High-Asset Divorce?
Businesses are often among the most valuable assets in a high-net-worth divorce. Alongside homes and other real estate, the value of your business will play a role in how the court, or out-of-court decisions, are made in dividing your property.
Understanding how a business is valued, then, is critical to ensuring that you know what to expect as you go through the divorce. It also enables you to ensure that you receive a fair settlement, no matter if you are keeping or letting go of the business. Numerous factors play a role in business valuation that many people do not think about as they head into this process.
Is the Business Marital or Separate Property?
A good starting point in determining if the business will be a factor in the divorce is to consider the ownership of it. Under New Jersey state laws, marital property in New Jersey is divided equitably. Typically, this includes any assets acquired during the marriage, such as the home you both purchased or the investments you both made.
Equitable distribution in New Jersey determines how marital assets are divided during divorce. Assets are distributed fairly based on factors such as the length of the marriage, each spouse’s contributions, and their financial circumstances. Marital property, including homes, investments, and retirement accounts, is subject to division, while separate property, like assets acquired before the marriage, may remain with its original owner.
However, various factors determine if the business ownership is subject to equitable distribution and whether or not it is marital property:
When was the business created? If the business was in place prior to the marriage, that may make it separate property, especially if only one person within the relationship manages that business.
What contributions did each person make to the business during the marriage?
Did the value of the business significantly increase during the marriage?
Also, consider whether any pre-nuptial or post-nuptial agreements were in place to govern the decisions about the business. These agreements typically are the foundation of decisions made regarding a business if it is present.
Methods of Business Valuation in New Jersey Divorces
With divorce and business ownership, there are several ways that the court can determine the value of that asset. It is critical to consider which methods may be beneficial to all parties involved. Your Toms River divorce lawyer will provide specifics on what may be applicable in your specific situation.
- Income Approach: The most direct option, this approach values the business based on profitability. It takes into consideration the value of the business now but also projected earnings. Financial analysis from third-party advisors can help to determine this.
- Market Approach: In this particular method, the court can use the value of businesses like yours that have recently sold in the region. This can then be adjusted upward or downward to fit the overall size of your business.
- Asset Approach: The final method is to focus on the tangible value of the business, such as the equipment and inventory, as well as intangible assets, such as the experience of your team.
No one way is better than others in every situation. However, in a high-asset divorce in NJ, your attorney may encourage determining the value of the business in various ways to best understand which method is most suitable for your situation.
Role of Forensic Accountants in Business Valuation
In a high-asset divorce in NJ, details matter. In many situations, a forensic accountant will be called into the process to examine the value of the business. In short, you do not take the other spouse’s details of the value of divorce but instead, consider all facts and a thorough analysis of that information. A forensic accountant will help with:
- Identifying hidden income within the business.
- Find unreported revenue that plays a role in value.
- Consider inflated expenses that may make the business look less profitable than it is.
- Analyze financial records, including profit statements and tax returns, to determine an accurate valuation of the business and spot any hidden details that could impact value.
- Determine the true market value of the business, considering all factors across the board.
Even if you fully trust your spouse in a high-value divorce like this, these details may be necessary to provide the court with the information to ensure equitable distribution in NJ.
How Business Ownership Affects Equitable Distribution in NJ?
New Jersey follows an equitable distribution model. That means that the division of assets follows what is considered to be fair, not necessarily a 50/50 split. This is critical since it will influence what happens to your business.
The court considers factors such as each spouse’s contributions and the business’s growth during the marriage. Your attorney will aid in protecting business interests in a divorce, such as offering other assets at a higher value to protect the business ownership.
Options for Dividing a Business in Divorce
While business valuation in divorce is critical, it is also necessary to consider the role of what will happen to the company if:
- One spouse buys out the other spouse. This means one spouse takes full ownership of the business.
- Sell the business. The business is sold, and the proceeds are split.
- Co-owners. It may be possible for some businesses to be co-owned on an ongoing basis after the divorce, though this is rarely the case.
Protecting a Business from Divorce Disputes
When possible, ensure a pre-nuptial or post-nuptial agreement is in place to navigate these challenges. It may also be helpful to structure a business in a way that minimizes disruptions in the event of a divorce.
Why Working with a Skilled Toms River Divorce Lawyer at Zeigler Law Group, LLC Is Essential
The complex business valuables related to this process require legal representation. A Toms River divorce lawyer will negotiate a fair division for you while protecting your financial interests. Sonya K, Zeigler, Esq. and her team have a well-earned reputation for committed and fierce legal representation. Our firm is here to provide you with the best possible guidance. Call Zeigler Law Group, LLC at 732-361-4827 or contact us online to schedule a free consultation. Located in Toms River, Red Bank, Princeton, and Mount Laurel, New Jersey, we serve clients throughout Ocean County, Monmouth County, Mercer County, and Burlington County.