It’s Not So Simplistic to Divide Business Assets in a Divorce

When Mary and Ron decided to split up, they figured it would be easy.  Mary was a partner in a dental practice.  Ron was a computer technician with a small local company.  Mary figured she had done all the hard work by going to dental school and setting up a private practice.  She put in long hours treating patients.  Ron had a decent income.  How hard could it be for them to divide business assets as part of their divorce?

Factors that Go into Determining Business Worth

There are a number of factor that go into determining business worth.  Ron might have not worked as a dentist, but he came home early to feed the children dinner.  He took them off to sports practice, while Mary stayed to accommodate patient schedules.    Ron was also the sole breadwinner when Mary was in dental school.  For certain, Ron had assisted Mary in establishing her dental practice and helping it to flourish.  This was a key issue in an interesting case named Brown v. Brown, 348 N.J.Super. 466 (2002)

Under New Jersey law, family business interests are subject to  equitable distribution .  This could include professional practices, construction companies or hair salons.  If income is derived from a business venture, a professional evaluation must be made concerning its fair value.

Fair value is a key term when dividing assets.  Experts should be retained by both parties to evaluate worth.  Some factors that are determined include:

  • Property: Does the business own real property or equipment?
  • Income: What are the company’s receivables? 
  • Debt:  How much does the business owe to outside parties?
  • Marketability: What would the company be worth if it was sold?
  • Length of the Business: When was the business started?  How far into the marriage did the company start?  Has the business enhanced during the term of the marriage?
  • Parties Roles in the Enterprise: Did both spouses contribute to the business?  Was one party resentful of the business and sabotaging efforts?  Has someone stolen from the business or hidden assets?  The latter was the case in Clark v. Clark, 429 N.J.Super. 61 (2012).  Here, the wife was accused of pocketing money from the family pharmacy.
  • Alimony:  Are alimony determinations affected by business allocations? 

Contact Us

Dividing a business as a martial asset can be a difficult task.  In order to calculate equitable distribution of business interests, it is necessary to secure expert opinion.  Generally, a forensic accountant is retained by counsel.  An experienced family law attorney will coordinate the engagement of all necessary experts.  At the Law Offices of Sam Stoia, clients have an added benefit.  Sam is not only an experienced family law practitioner, but he has a BS in accounting and several years of experience working for large public accounting firms.  Contact Sam to set up an appointment to discuss your concerns regarding divorce and related issues.

It’s Not So Simplistic to Divide Business Assets in a Divorce

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