As a business owner, protecting your business is likely to be of the most important aspects of your divorce. The last thing you want is for your (soon-to-be-former) spouse to have a say in how you run things once your marriage is over. If you fail to adequately protect your business during your divorce, this could be a very real possibility.
Protecting Your Business
With this in mind, here are some important tips for ensuring that you retain sole ownership and control of your company after your divorce:
1. Review Your Prenuptial (or Mid-Marriage) Agreement.
Did you and your wife sign a prenuptial (or mid-marriage) agreement? If so, one of your first steps should be to review the agreement to see what it says about your business.
Ideally, it will unambiguously state that your business is yours to keep; and, if it does, then this should be the end of the inquiry. As long as the agreement is legally-enforceable, the terms of a prenuptial or mid-marriage agreement will override New Jersey’s default rules governing the distribution of marital property.
2. Review Your Company’s Organizational Documents.
As a general rule, any assets that you owned prior to your marriage are yours to keep after your divorce. If you formed your business before you got married (the date of formation should be referenced in the company’s organizational documents), then this likely means that at least a portion of your business qualifies as your “separate” property.
If you expanded the business while you were married, or if you invested joint funds in the business, then a portion of your business may qualify as “marital” property as well. But, knowing that at least a portion of the business is undeniably yours can provide a solid foundation for negotiating the remaining ownership interest during your divorce.
3. Consider Your Wife’s Priorities.
If all or a portion of your business qualifies as marital property (and your business is not protected by a prenuptial or mid-marriage agreement), then this means that the marital portion will be on the table in your divorce. In order to protect your business, it is important to think about what your wife wants to protect as well.
What are her priorities when it comes to your other marital assets? While one option is to split the proverbial baby, another (and generally better) option for business owners is to identify assets that can offset the value of their wife’s potential ownership interest in the company.
Does your wife have a business of her own? Does she want to remain in the family home? Does she have a substantial retirement account; or, do you have an investment portfolio you would be willing to divest? These are all potential bargaining chips for negotiating exclusive ownership of your business.
4. Obtain an Independent Valuation.
Unlike real estate and items of personal property, valuing a privately-held business is not a straightforward process. In order to protect your business during your divorce, you need to know what it is worth, and this means obtaining an independent valuation.
5. Think Outside of the Box.
While negotiating the distribution of your marital estate is one option for protecting your business, you may have other options available as well.
For example, would your wife be willing to accept alimony in exchange for giving up her share of the company? Can you take advantage of state or federal tax laws to find a solution that is advantageous to both parties? By thinking outside of the box, you may be able to find a way to protect your business even if it doesn’t initially seem like options are available.
Speak with a New Jersey Divorce Lawyer in Confidence
Are you a business owner in New Jersey? Are you preparing to go through a divorce? If so, we encourage you to contact us for a confidential initial consultation. To speak with an attorney at our offices in Hackensack, please call (201) 654-4263 or inquire online today.