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If you owned a business before you got married, you may assume it stays yours entirely if you divorce. Sometimes that is true. Sometimes the answer is more complicated.
New Jersey generally treats property you owned before marriage differently from property acquired during the marriage. A business can be harder to sort out when it grew during the marriage, your spouse helped with it, or family money went into keeping it running. At DeTorres & DeGeorge Family Law, we help business owners and their spouses determine what portion of a company may be subject to division in a divorce.
Is a Business Started Before Marriage Separate Property in New Jersey?
A business you already owned when you got married is generally considered separate property in New Jersey. The date matters. If you opened a company in 2014 and married in 2019, the ownership interest you brought into the marriage does not automatically become marital property simply because you stayed married for several years.
You still need records showing what existed at the time of the wedding. Old tax returns, financial statements, business records, ownership documents, and bank statements may become useful. If nobody can establish what the business was worth when the marriage began, figuring out what portion should remain separate can become harder.
How Can Your Spouse Gain a Marital Interest in the Business?
Your spouse does not necessarily have to appear on the company paperwork for the marriage to affect how the business is treated. Maybe your spouse worked for the company without receiving a normal salary. Perhaps you invested marital money in equipment, payroll, or expansion.
A spouse can contribute in less obvious ways too. One person may take on more childcare and household responsibilities while the other spends long hours building the company. Those facts can become relevant when deciding whether growth during the marriage came from marital effort.
Keep in mind that an interest in the increase in value is different from automatically becoming a co-owner of the entire business.
What Happens if the Business Increased in Value During Your Marriage?
This is often where the argument starts. Suppose your company was worth $150,000 when you married and $900,000 when divorce became a reality. Starting it before marriage does not necessarily determine what happens to that increase.
New Jersey courts can consider why the value increased. If growth came from work performed during the marriage, such as bringing in customers, expanding locations, developing products, or improving operations, some of that increase may be considered during equitable distribution.
An increase caused by outside market forces can be treated differently. You may need to separate the value you brought into the marriage from the growth that happened afterward.
How Is a Business Valued During a New Jersey Divorce?
You cannot divide a business fairly until you have a reasonable idea of what it is worth. That can take more work than checking the company’s bank balance.
A valuation may examine revenue, expenses, assets, debts, cash flow, ownership interests, and the income the business can reasonably produce. The person performing the valuation may also need to look at what the company was worth at an earlier date. Business owners should expect financial records to receive close attention.
How Can You Protect Your Business During Property Division?
Start with the paperwork. Find records showing when you created or purchased the business and what it looked like before marriage. Gather tax returns, ownership agreements, financial statements, loan documents, payroll records, and information about money invested during the marriage.
Do not suddenly move business assets, change ownership, or start paying unusual expenses because divorce is approaching. Those decisions can create additional questions.
At DeTorres & DeGeorge Family Law, we can look at the history of the company, how it changed during your marriage, and what your spouse is claiming. The goal may be to keep the business operating while addressing any marital portion of its value through the broader property division process.
Work With DeTorres & DeGeorge Family Law to Navigate Your Divorce
A business you built before marriage may represent years of work that began long before your relationship. You still need to know how New Jersey law may treat what happened to that business during your marriage.
Contact DeTorres & DeGeorge Family Law at (908) 923-0150 or (973) 828-8079 to schedule a consultation. Bring us the records you have, even if they are old. We can look at when the business began, what it was worth before marriage, how it grew, and how both spouses contributed during the marriage. From there, we can help you deal with the business as part of the rest of your divorce.
