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Assigning a value to a business in New Jersey divorce

On Behalf of | Oct 14, 2021 | Divorce |

Divorce proceedings in New Jersey can become complex, especially if there are a lot of assets involved. If you own a business, the court will determine its value to decide on the portion your spouse is entitled to. Here’s how the value of your business is determined and the factors that could influence division.

Divorce in New Jersey

First of all, New Jersey is an equitable distribution state. This means that the court will not split your assets 50/50; rather, the court will determine what’s fair to your spouse to ensure that they are well taken care of after the divorce. Normally, the court tries to make sure that a partner can maintain the life they were accustomed to in marriage.

Secondly, there are different categories for separate property and marital property in a divorce. If you started your business after getting married, then that business becomes marital property even if your spouse wasn’t directly involved. If you started the business before marriage, its value between the time you started it to the moment you got married is considered separate property.

Marital property is subject to equitable distribution. Whether you started the business before or after marriage, part of it belongs to your spouse.

How is a business valued in New Jersey?

When you petition for divorce in New Jersey, it’s a good idea to hire financial experts to determine the value of your business. The experts will look at three main factors, including:

  • Business revenue
  • Business expenses
  • Business debts

While the court is dividing the business between you and your partner, they will consider various elements. The first is the contribution of your spouse to the business. Was your spouse an independent contractor, employee, shareholder or partner in business?

If your spouse didn’t contribute directly but stayed home to take care of the kids and manage the household, then their contribution is that of a homemaker. Other factors include the type of the business and the marital interest in the shares of the business.

During the valuation of your business, make sure that you provide all your financial details to the court. This is because when judges find any irregularities, they may report you to the IRS, which could lead to further legal issues. It’s in your best interest to approach the entire divorce process with an attitude of fairness and compromise rather than trying to prevent your ex from getting their share.

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