Navigating the division of a family business during a divorce presents unique legal and financial challenges. Unlike splitting traditional assets, a family business often carries intricate emotional ties and future earning potential that must be addressed. Regardless of whether the family business was established by previous generations or created when the marriage was new, the thought of losing it can be heartbreaking. Please continue reading as we explore how you can divide your family business during a divorce and the importance of connecting with our knowledgeable Edison Property Division Lawyers for guidance.
Is New Jersey an Equitable Distribution State?
First and foremost, it’s important to understand that New Jersey is an equitable distribution state, meaning that during a divorce, marital assets are divided fairly, but not necessarily evenly. Instead of a 50/50 split, the court will consider various factors to determine what is fair given the unique circumstances of the union.
If a family business is brought into the marriage, it will likely be considered separate property, thus excluded from equitable distribution. However, if the business was acquired after the marriage, it will be considered marital property and be subject to equitable distribution.
What Will Happen to My Family Business During a Divorce?
Dissolving your marriage is difficult enough, encompassing a multitude of complex considerations such as property division, child custody, and financial arrangements. When a family business sis involved, the process can become even more overwhelming. A key step for each party is to clarify their desired level of continued involvement in the business, as well as the most equitable way to divide the business financially, aiming to facilitate a seamless resolution amid the already stressful circumstances.
One of the most popular options for dividing a family business in a divorce is the “buyout” method. This involves one spouse purchasing the other’s share in the business. This will enable the remaining spouse to continue operations. However, this option requires careful valuation and negotiation to ensure fairness.
If buying out the other spouse is not feasible, you can consider co-ownership. Typically, this option is best suited for amicable spouses who can maintain a working relationship. This option will require clear agreements regarding management, oversight, and financial decisions.
Another common option is to sell the business to a third party, and the proceeds will be divided between the spouses. This is usually the case when neither spouse wishes to continue operating the business. Depending on the unique circumstances, you can also consider offsetting assets. This involves one spouse retaining the business, and the other receiving a portion of the value through other marital or separate assets. The business can also be placed in a trust to keep it from conmingling with marital assets and manage its ownership.
Determining the most appropriate method hinges on several elements, such as the couple’s rapport, their preference for maintaining the business, and the practicality of each choice from a financial standpoint. Seeking advice from an experienced attorney at Arndt & Sutak, LLC, is vital for identifying the best course of action. Connect with our firm today to schedule a consultation.
