How is a Small Business Divided in a New Jersey Divorce?
Thousands of New Jersey couples successfully own and operate small businesses as their main source of income. In thousands more cases, individuals operate their own businesses while their spouses work traditional jobs or take on homemaking roles. In others yet, the small business contributes only a small part of the couple’s total household income.
No matter how a small business figures into your family’s finances, it will need to be divided between you and your spouse if you decide to divorce. How your business is divided depends on your plan for it following the divorce. Talk to your spouse about your business’ future before you begin the process of dividing your assets. Selling the business, continuing to operate it jointly, or one partner buying out the other’s interest and continuing to run the business singly are all valid, possible futures for your small business.
New Jersey is an equitable distribution state, which means that when a couple divorces, their assets are not necessarily divided 50/50. Instead, the court considers a list of factors regarding each partner’s current and projected needs and assets to divide their property in a way that meets both parties’ needs.
Methods for Determining and Dividing a Small Business’ Value
There is no uniform method for determining a business’ value that works for every case. Depending on your business’ current circumstances and your future plans, your business’s value may be determined by one of the following three methods.
The Income Method. In this method, a business’ potential income is considered when determining its value. This includes its projected growth and current income and assets. The business’ debts and expenses are considered against its income to determine an appropriate value.
The Market Method. In this method, competing companies are considered when determining a business’ value. These other companies’ financial health is used as a yardstick for measuring the divorcing couple’s business’s value. Non-tangible assets, such as customer relationships, are figured into this calculation.
The Asset Approach. With the asset approach, the company’s assets are the most prominent consideration. Appraisers consider the business’ assets against all depreciation that has occurred since it opened. Its projected future earnings are also considered when determining a value through the asset approach.
Your attorney can advise you about the most productive choice for your company. If you are a business owner and you are considering filing for divorce in the near future, contact The Law Office of Eric B. Hannum Esq., LLC. at 732-370-9596 to schedule your initial legal consultation with our firm. We are here to provide you and other business owners throughout Mercer, Monmouth, Ocean, and Burlington counties with expert legal advice and representation as they work through the divorce process.