How Can You Divide a Family Business During a Divorce?

Property division is never easy during a divorce. Distributing belongings and important assets is challenging both financially and emotionally. One of the most complex assets that must be considered is a shared business. If you and your spouse started or grew a family business together, deciding how to divide the company during your divorce can be extremely challenging. Understanding all of your options, as well as your legal rights, is crucial for ensuring that asset distribution is as seamless and pain-free as possible. For more information and to secure skilled legal counsel, reach out to a Morristown divorce business valuation attorney today.

Are Family Businesses Considered Marital Property?

Before you can determine how to divide the family business, you must establish whether the company is marital or separate property. New Jersey is an equitable distribution state, meaning that during a divorce, assets are divided in a way that is fair but not necessarily equal, depending on each individual’s financial situation, contributions made to the marriage, and other relevant factors. However, only marital assets are subject to property division.

Family businesses are often considered marital property if both spouses were involved in or contributed to the company. The business will be considered jointly owned if:

It was started during the marriage
Marital assets (like cash) were used to fund or support the business
Both spouses contributed labor or intellectual property
One spouse made sacrifices to their career or education to support the family in a way that allowed the other to start or run the business

The only way that a family business will be considered separate property is if it was started or bought before the marriage, or acquired through a gift or inheritance designed only for that spouse. However, even if the business was separate, it can become marital property over time if any of the above is true.