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How to Deal With Divorce if You Have a Family Business

The simplest divorces involve no shared custody and limited joint assets. Unfortunately, not every divorce is simple. Many divorces involve the division and distribution of complex assets, raising difficult legal and personal questions. If you have a family business with your spouse, for example, what happens to the business in divorce? How should you approach the business in the divorce process? Read on for a discussion of what can happen to the family business in a divorce, and call a knowledgeable Englewood complex divorce and property division attorney for help with a New Jersey family law matter.

Options for Distributing the Business in Divorce

If you and your spouse operate a family business, you will need to collectively decide what to do about the business in the event of a divorce. It helps to plan ahead for potential divorce and include defined steps to take in a shareholder agreement, buy-sell agreement, or even in a prenuptial agreement.

Regardless of whether the decision was made ahead of time or at the time of divorce, there are generally three options for dealing with the family business in a divorce. Depending on the circumstances of the business and your relationship with your ex, each option has its own advantages and potential drawbacks:

  • One spouse buys out the other spouse’s ownership interest and continues to operate the business on their own. This is the most popular method for dealing with a family business in a divorce.
  • The parties sell the business and split the proceeds. If one party refuses to sell but the options are not feasible, the other spouse may need to obtain a court order to force the sale.
  • The parties continue to co-own and co-operate the family business after the divorce. If the parties believe they can coexist amicably, then this option may be appropriate.

Valuing the Business

In order for the business to be fairly divided or otherwise dealt with in the divorce, the parties must obtain an accurate valuation of the business. Typically, the parties will retain a financial expert such as a certified public accountant or a certified business appraiser to issue an expert valuation. Often, each spouse will retain their own expert. There are three main approaches to valuing a business:

  • Income-based valuation. The income approach involves a professional appraisal of the current and anticipated future income generated by the business.
  • Asset valuation. The asset valuation approach looks at the assets and liabilities of the business to estimate the business’s value. This approach may not work for service-oriented businesses or those with limited assets.
  • Fair market value. With this method, the parties will look to other similar businesses in the same industry and region and compare their selling price. While this method may appear straightforward, it is often difficult to obtain this data as there may be no comparable businesses sold in recent years.

Call for Help With a New Jersey Property Division Matter

If you’re considering divorce in New Jersey or dealing with complex assets, child support, child custody, property division, or other family law issues, contact the Englewood family law attorneys Herbert & Weiss at (201) 500-2151.