Owning a Business and Divorce: Key Challenges for Business Owners

Dividing a business in a divorce is a complex matter and one that requires an experienced family law attorney. A business may be subject to equitable distribution in a divorce in New Jersey, which means that both people in the marriage have an interest in the business. In other words, even if your spouse does not have an ownership interest in the business, he or she may still have an equitable interest in it.

Understanding Business Valuation in Divorce

During the discovery process, the parties involved in the divorce are expected to exchange all relevant information regarding their respective financial situations. This is also true with regard to the business. The way that a business is divided in a divorce is fact sensitive and may require the opinion of a third-party expert. The total appraisal will consider the value of any tools, equipment and other assets that may be tied to the company, in addition to the value of the business itself.

How Marital Property Laws Affect Your Business

Businesses that were started during a marriage, or increased in value during the marriage, may be considered marital property and would be subject to equitable distribution. Business valuations can be very complex. Working with a trusted team of professionals is an essential part of the divorce process.

Options for Dividing a Family Business in a Divorce

The amount of the business that is subject to equitable distribution will depend on the facts of your specific case. Some factors to consider are:

• Did you or your spouse own the business prior to marriage?
• Are you open to selling the business to a third party?
• Do you own the business alone or with additional partners?

In the end, you’re likely to see one of three outcomes: joint ownership, one spouse retains ownership, or sale of the business.

Executive Compensation & Divorce: What High-Income Earners Need to Know

The divorce process can be complex for high-income earners who are concerned about what their financial future might look like following a divorce. Because executives often receive compensation packages that consist of additional benefits that can be difficult to quantify, calculating alimony and child support payments can become very complicated.

Identifying Divisible Executive Compensation Assets

Executive compensation items most often include:

• Employee stock options
• Restricted stock
• Employee stock purchase plan
• Deferred compensation plan
• Cash bonuses
• Severance packages

Identifying these assets will involve a review of documentation, including employment contracts, compensation agreements, pay stubs, W-2s, tax returns, 1099s and possibly others.
These types of compensation are generally considered marital assets if they were earned for work performed during a marriage. Depending on the complexity of the situation, it may be important to work with a forensic accountant along with a knowledgeable family law attorney.

Valuing and Dividing Executive Compensation in Divorce

Whether the executive compensation is yours or your spouse’s, it is wise to seek legal representation as early in the divorce process as possible. The division of executive compensation can be done in a number of ways: The parties can either agree that they will take an average of recent years’ total incomes to establish the level of income, or they may agree to a percentage share of the bonus that will be shared. Trying to handle the division of assets on your own can expose you to a lot of risk. A family law attorney can provide you with a list of documents necessary to properly determine the value of your assets, and from there, we will clearly define what is considered marital property versus separate property – a distinction that will prove incredibly valuable, especially if your case ends up at trial.

Tax Implications for High-Income Earners

A divorce for a high-income earner can pose complicated tax challenges. Complex income sources like bonuses, stock options, or deferred compensation often require careful valuation and tax planning. Working with an experienced divorce attorney and tax professional can help minimize tax exposure and protect your financial interests.

Your Business Divorce Lawyer Can Help Answer Key Questions

DeTorres & DeGeorge Family Law Attorneys are well-trained in cases involving business ownership and executive compensation and will help you answer the following questions:

• Are the assets marital?
• Are they vested?
• How will they be valued?
• How will they be divided?
• What are the tax implications?
• How will they impact alimony and/or child support?

Is the Business or Executive Compensation Marital Property?

Businesses and executive compensation can be considered marital property in New Jersey, but only if they were acquired or increased in value during the marriage.

How Will These Assets Impact Alimony and Child Support?

These assets are considered part of a spouse’s income, but they can affect alimony and child support differently. All compensation received by the parties will be considered in establishing support. Finding a trusted and experienced alimony lawyer in New Jersey will help you navigate a complicated high-asset divorce case.

What are the Tax Consequences of Asset Division?

It is important to understand that a divorce could push you into a different tax bracket once you begin filing taxes separately. During a divorce, you will need to pay close attention to the tax implications regarding the division of major assets like a business. Property transfers between spouses are not generally taxable, but they could bear a capital gains tax in the future for stocks or real estate that have appreciated in value. This is when it becomes increasingly important to reach out to a tax expert and work with attorneys who have extensive experience in debt and asset distribution.

Why Choose Our Business Divorce Attorneys for Your Case

Choosing our New Jersey business divorce attorneys means having a legal team that understands both the emotional and financial complexities of dividing business assets in a divorce.

Proven Experience in Complex Asset & Business Division

We have extensive experience handling cases involving privately owned companies, professional practices, and executive compensation. Our attorneys will ensure that every detail is carefully evaluated and your financial interests are protected. Our team works with trusted financial experts to ensure every asset is accurately valued and fairly distributed. We have a clear understanding of equitable distribution in New Jersey, and we can help you obtain the best outcome possible.

Strategic Counsel for High Net Worth Divorces

Our team works diligently to accurately value your business and structure settlements that preserve your long-term financial interests. We approach each case with discretion, strategy, and a commitment to achieving fair results while minimizing disruption to your livelihood. When your business and future are on the line, you can trust our team to provide the skilled representation and personalized attention your case deserves.

Secure Your Future with a Trusted Business Divorce Attorney in New Jersey

If you are considering a divorce and want to learn about your rights and obligations associated with your business, call us now to schedule an initial consultation with DeTorres & DeGeorge Family Law Attorneys to discuss the specifics of your matter.

For more information, please call us at 908-284-6005.