Owning a business while going through a divorce can feel like watching two different parts of your life collide. You’ve spent years building client relationships, perfecting operations, maybe even mortgaging your home to fund growth.
Now you’re facing a hundred questions you didn’t expect. Will you lose control of day-to-day operations? Can you afford to buy out your spouse’s interest? How do courts determine what your business is worth when much of its value came from your personal expertise or labor?
The questions are understandable, but rest assured: New Jersey doesn’t take a one-size-fits-all approach to business division during divorce.
What are business valuations used for in divorce?
Think of business valuations as creating a shared understanding of what you’re actually working with.
Without that baseline number, you’re negotiating without all the information. One person thinks the business is worth $500,000 while the other assumes it’s closer to $200,000. A definitive valuation gives everyone the same starting point for settlement discussions, whether you end up pursuing a buyout, exploring continued co-ownership, or deciding to sell entirely.
And while you may finalize your divorce without stepping in front of a judge, having professional documentation of your business’s worth becomes essential if you end up in litigation.
How does ownership structure impact business valuations and asset division?
The core question in any business valuation during divorce is the same, no matter which party owns the business: What portion of it constitutes marital property? Business valuations consider how and when the business was started, business growth during marriage, spousal contributions to the business, and the reinvestment of marital funds, even if you owned the business before getting married.
However, the complexity of getting to that answer varies depending on how your business is structured:
- Sole ownership typically involves straightforward valuation of marital vs. separate components.
- Co-ownership requires untangling business value from personal labor contributions and determining actual ownership percentages.
- Family businesses add layers of complexity around succession plans, other family members’ interests, and whether the divorce affects business operations or other stakeholders’ financial security.
Who is usually involved in business valuations?
In the context of divorce, business valuation begins with your legal team connecting with financial experts to determine which analysis your business needs. The business valuation process typically involves professionals such as:
CPAs
Your CPA helps provide historical context about your business’s financial patterns and tax strategies. They can explain financial details to the legal team, such as why your profitable construction company reported minimal taxable income due to depreciation schedules, or how your seasonal retail business generates most revenue during specific periods.
Business appraisers
Certified business appraisers take the financial data and all relevant information about the history and operations, and determine what your business is actually worth.
What makes business appraisers particularly valuable in the divorce context is their ability to account for industry-specific factors, which don’t show up in standard financial statements. For example, they’ll help assess whether a consulting practice heavily dependent on the owner’s personal relationships might maintain its value after divorce, or whether a restaurant’s location, lease, and established customer base can sustain the business through ownership changes.
Forensic accountants
Forensic accountants aren’t automatically required for every business valuation, but if increased financial transparency is necessary or when business and personal finances have been intermingled, it’s important to bring them into the conversation.
Forensic accountants examine your business’s financial patterns to identify discrepancies that standard bookkeeping might miss. They reconstruct income when business owners have mixed personal and business expenses, such as using company funds for family vacations or personal vehicle payments.
Financial analysts
For businesses with complex investments, stock options, or retirement plans, financial analysts complete the valuation team by determining the value of those components and how they integrate into the overall business worth.
After this team completes the valuation process, you’ll need to determine how you want to structure your business interests in the final divorce settlement.
What comes after business valuations?
Understanding your business’s value is only part of the equation. The approach depends largely on your ownership situation and what you want your post-divorce business life to look like.
Buyout scenarios
For sole owners, a buyout may mean compensating your spouse for their marital interest in the business while maintaining full control. Your legal team can help structure this compensation in various ways, such as:
- Lump sum payments
- Structured payments over time
- Offsetting business interests against other marital assets
In the case of co-ownership, one spouse might buy out the other’s entire stake to become the sole owner. This works well when one person is the primary operator, and the other wants to step away completely.
The payment structure you choose affects business operations, so it’s important to work with your attorney to find an approach that works for both your settlement and your business’s cash flow needs.
Continued co-ownership considerations
When buyouts aren’t financially feasible or desirable, some divorcing couples maintain joint business ownership even after their marriage ends, as their working relationship remains productive. This approach requires detailed agreements about decision-making authority, profit distribution, what happens if one partner wants to sell their interest, and how to handle disagreements about business direction.
Co-ownership generally works best when both parties actively contribute to operations and share similar business philosophies. It’s less successful when one spouse was never involved in day-to-day operations or when the divorce involves high levels of conflict.
Business sale planning
If neither buyouts nor co-ownership works for your situation, selling the business entirely can offer clean separation. However, it requires careful timing considerations, which your legal and financial team should help you evaluate. Various factors affect the sale price and timing, which is why coordinating with professionals who are familiar with both your business and your divorce timeline is important.
Protect your business with guidance from a New Jersey Divorce Attorney for business owners
When your business is involved in your divorce, getting the valuation right is a key part of preparing for your financial future.
At Jacobs Berger, we work with forensic accountants, business appraisers, and other financial professionals to ensure your business gets properly valued and your interests are protected. We help you understand what qualifies as marital property and structure settlements that make sense for your situation.
Contact our team to coordinate your strategy planning session.
