Property distribution is an important part of the divorce process. New Jersey is an equitable distribution state, meaning judges use fairness as the criteria for division rather than equality.
They use multiple factors to determine what is equitable. Businesses are also property and subject to distribution, but their division can be complex.
Who started the business?
Generally, any business established or expanded during the marriage is marital property, subject to division. If one spouse started the business before the marriage or it was an inheritance or gift for a single person, judges usually see it as separate property. Usually, this makes it separate property that remains with the original owner. However, if the other spouse contributed money, time or labor to the business during the marriage, judges may consider it marital property regardless.
How do courts divide businesses that are marital property?
It is the value of the business that courts generally consider to be a joint asset. Depending on the value of other shared assets, the court may simply give the value of the portion of the business they feel one spouse deserves to him or her via other property. The couple may also come to an agreement. Options include one spouse buying out the other or both parties selling the business and splitting the proceeds. They may also choose to simply continue co-owning the business if they were business partners.
According to Grand Valley State University, the U.S. has 5.5 million family-owned businesses. During a divorce, businesses are property. Because they require so much time, money and effort to start and keep going and may include a long family history, the thought of losing part or all of a business may be painful. However, courts generally leave room for divorcing couples to negotiate a satisfactory agreement with each other.