Complicated Divorces Can Grow From Business Ownership
- October 18, 2013
- No comments
Whether you are a contractor, an accountant, a professional entertainer or operate a manufacturing plant, your spouse or civil union partner can seek a portion of your business proceeds and assets in a highly contested divorce. When one or both parties to a divorce owns a small business, the business can complicate divorce proceedings as the divorcing couple attempts to equitably distribute assets. During divorce proceedings, a party may seek an interest in the business and substantial alimony which will allow them to continue to enjoy the lifestyle provided by the hard work of the business owner during the marriage. A divorce can create major issues for the business owner and their business partners. New Jersey courts provide for wide discovery rules. Judges can authorize either party to request a very wide scope of documents and information regarding the business and its value. Further, this means that all of the documents, unless there is a confidentiality order, will become part of the public record. If business information becomes public record it will become available for all competing businesses to view which may result in the loss of your business’ competitive advantage. In addition, courts will attempt to ascertain the fair value of the business which is distinguished from the fair market value of the business. This process can become very complicated. The valuation of the business will depend a great deal on the business’ demonstrated cash flow, assets, accounts payable and receivable statements, payments of insurance, travel, vehicle expenses and other typical business write-offs as well as payment of pension plans to employees, and other factors. During the divorce, a party may seek an equitable interest in the business. It is difficult to determine just how much of an interest a spouse is entitled to because, as previously mentioned, there are factors such as the fair value of the business which are specific and particular to each individual situation. Even if a business was started before the parties were married, or the owner became the owner through an inheritance, the other party is entitled to seek an equitable interest in the appreciation in the value of the business that occurred during the marriage and even the term prior to the marriage where the parties lived together as a family depending on the facts. Cash flow from a closely-held or family owned business is often the main or sole source of income for a person, a family,or families. Whether you are the business owner or the supported spouse, it is critical that you obtain experienced legal counsel to guide you through discovery, the business valuation process and the divorce itself. For more information about small business divorce, alimony, equitable distribution or other family law matters in New Jersey visit NJCivilUnionLaw.com and HeatherDarlingLawyer.com. This blog is for informational purposes and in no way is it intended to replace the advice of an attorney.