Determining the Value of a Business

Ownership of a family business can complicate a divorce. Whether it’s a company both spouses built together or a business one spouse brought into the marriage, determining its value is a central issue. If you are in this situation, Somerset County family lawyers are familiar with how value is assessed, so they can help you prepare for what lies ahead.

What Is Considered a Family Business?

In New Jersey, a family business may be one that both spouses actively run together, such as a restaurant, construction firm, or professional practice. But it can also refer to a business that only one spouse owns or operates, even if the other spouse plays no direct role.

For divorce purposes, the important question is whether the business is considered marital property, separate property, or a mix of both.

• Marital property generally includes businesses formed or significantly grown during the marriage.
• Separate property typically covers businesses owned before the marriage, but if the value of that business increased during the marriage, the increase may be subject to division.
• Hybrid situations are common, especially if marital funds were invested into a pre-marital business or if the non-owner spouse contributed indirectly.

Because businesses are typically one of the most valuable assets a couple owns, properly assessing their worth is critical. Courts in New Jersey aim for equitable distribution, which doesn’t always mean a 50/50 split, but rather a fair division based on multiple factors. If a business is undervalued or overvalued, one spouse could end up with far less, or far more.

How Can a Business Impact Divorce Outcomes?

Business valuation is complex because it goes beyond simply looking at bank accounts or equipment. It often requires professional experts. After all, the business’s current and future earning potential needs to be assessed. Reviewing tangible and intangible assets, such as property, equipment, or intellectual property, is an important part of the process as well.

Goodwill, reputation, and customer base may also factor into value, especially in service-based businesses like medical or law practices. Comparing the business to recent sales of similar companies could be analyzed, too.

In some cases, one spouse buys out the other’s interest. In others, assets may be offset, such as one spouse keeping the business while the other receives a greater share of retirement funds. Rarely, a business may be sold, with proceeds divided.

If a business is a source of income, that also affects alimony and child support calculations. Courts want to ensure that financial obligations are realistic and based on accurate earnings, not underreported income or manipulated financial records.

Connecting with a Somerset County family lawyer early in the process can help protect your interests, ensure an accurate valuation, and guide you toward a resolution that secures your financial future.

Have you been wondering what will happen to the family business as you separate? Speak with the legal team at the Law Offices of Kisha M. Hebbon, LLC if your business is in New Brunswick, North Brunswick, Piscataway, Edison, Somerset County, or Middlesex County. Reach out to schedule a confidential consultation.