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Divorce and the joint business in New York

On Behalf of | Apr 1, 2022 | Divorce |

As an entrepreneur going through a divorce, you probably harbor concerns about the impact of property division on your business. This especially applies if you started or share the business with your soon-to-be ex-spouse.

New Jersey is an equitable distribution state, not a community property one (only nine states adhere to the community property policy), which has a couple of ramifications for you and your business.

The court categorizes property

All assets fall into either the separate or the community category. Generally, possessions that you owned before the marriage and inheritances and gifts given solely to you and not as a joint gift for you and your spouse comprise the former. The latter contains property obtained during the union.

Separate property remains with the owner. In New Jersey, the court distributes community assets based on equitability, or fairness, rather than simply granting half to each party like in community states, though a 50-50 split may still occur. However, circumstances may become complicated if belongings originally considered to be separate property end up mingled with community property. For example, if you owned your home prior to marriage, but added your new husband or wife’s name onto the title, it is no longer separate property.

Shared businesses are community property

If you started your business with your soon-to-be-former spouse before your marriage, both of you may possess entitlement to a share. If you went into business together after the marriage, the company is most likely subject to division. Even if you started it yourself, if your spouse contributed in any way, including providing labor or money, the court may see it as community property.

During a divorce, the status of a business may be tricky to define. Gathering evidence of your investment into starting or contributing it may help solidify your claim.