A business may be one of the largest assets in a divorce. Spouses often want to know how the court determines the business’ value and whether the other spouse can claim a portion of it. The answer depends on when the spouse acquired the business, how it grew and what the company owns.
When a business interest may be marital
New Jersey follows equitable distribution rules. Courts divide marital property fairly, although the division may not be equal. If a spouse started or purchased a business during the marriage, the court may treat the interest as marital property.
A spouse may have owned a business before the wedding. Even so, the court may examine whether marital income, labor or shared resources increased its value.
How business value is calculated
A business valuation may involve a review of several financial and operational factors, including:
- Business revenue and expenses
- Equipment, property and other assets
- Outstanding loans and other obligations
- Customer relationships and goodwill
- Owner compensation and personal involvement
- Sales of similar businesses
When valuing a business in New Jersey, courts may distinguish enterprise goodwill from personal goodwill. Enterprise goodwill tied to the business may be subject to equitable distribution, while personal goodwill tied to the owner generally is not treated as a marital asset.
A valuation professional may assess company income, asset values or comparable business sales. The professional may also combine these approaches to reach a well-supported estimate.
Why the filing date matters
In New Jersey, the filing of the divorce complaint generally provides the starting point for identifying and valuing marital assets. The business may gain or lose value between that date and the final judgment. The court may examine whether changes resulted from market conditions, new investments or either spouse’s work.
The court may apply a different date when the facts support that approach. Physical separation alone does not always establish the valuation date.
How the court may divide the interest
The court does not always require a sale. One spouse may retain the business while the other receives money or other marital assets. The court may also consider debt, available funds and the difficulty of dividing ownership.
A careful valuation can clarify the business’s marital value and help spouses make informed decisions about property division.