Is My Spouse Entitled to Half My Business if We Split?

We hear this question a lot: If I’m divorcing in New Jersey, is my spouse entitled to half of my business if we split? Let’s take a look.

During a divorce, one of the toughest aspects to live with is handling the division of property. Choosing who gets what can become uncertain, stressful, combative, and downright hostile. 

When a business you’ve built is involved, it can escalate a lot of feelings. We hear this question a lot: If I’m divorcing in New Jersey, is my spouse entitled to half of my business if we split? Let’s take a look.

Business Assets: How Are They Classified?

In New Jersey, the law states that any assets or property acquired during the marriage is subject to being distributed along with the rest of the marital property. For instance, if you’re getting divorced, your spouse may ask for an “equitable distribution” of your house and cars. They can also get a portion of your financial assets including investments and retirement. 

If you own (or co-own) a business, it’s considered a financial asset, which means your soon-to-be-ex can ask for it to be equitably distributed. (Please note: There are very few exceptions to this law. For instance, inheritances or gifts left to one spouse may not be considered marital property if they were never added to the couple’s finances.)

How Businesses Are Divided

Yes, your business is a marital asset, which means you’ll have to equitably distribute it with your spouse. However, don’t give up just yet. There are a few conditions that apply to this that could help to save you substantially. 

First, if you inherited your business, then you may not have to share it with your spouse. If you started the business before you married, then your spouse isn’t entitled to half of its entire value. Instead, he or she can only lay claim to how much it has grown since the marriage. If you started the business after the marriage, however, your spouse could be entitled to their half-share in the assets.

Marital Property

In New Jersey, marital property includes assets and properties that came into your possession during the marriage. If you buy a house or car after getting married, those assets are considered part of the marital pot, as well as bank accounts, investments like stocks and bonds, retirement funds, and even businesses.

But all of this is off-limits to your spouse if you owned it before the marriage. Instead, they can only put a claim to the growth from these investments or businesses since that point. Also, New Jersey specifically excludes any “gift, device, or intestate succession” that was made just to you. If your uncle, for instance, leaves you his car dealership in his will, then that belongs to you and you alone, even if it was acquired during the marriage. 

New Jersey Law and the Division of Marital Property

The first step in splitting marital assets is to define what is and isn’t part of the property to be distributed. The term “equitable” gets mentioned a lot here because the distribution must be just that. 

This doesn’t literally mean a 50/50 split right down the middle. Judges are given some discretion in determining this split which can be influenced by the following factors:

• Length of the marriage;
• Age of the spouses and their respective health (both physical and emotional);
• Current value of the marital property;
• Pre-marriage property, which may not be subject to distribution;
• Each spouse’s economic circumstances;
• Each spouse’s debts;
• Couple’s standard of living during the marriage;
• Each spouse’s contribution to the marital property (its acquisition, depreciation, and appreciation);
• Each spouse’s contribution to the education and training of the other spouse as it relates to their earning potential;
• One spouse’s contribution to the marriage as a homemaker (if applicable);
• Tax burden owed by each spouse after the property is distributed;
• Income and earning potential of each spouse; and
• Any legal documents (such as a prenuptial agreement) that relate to the distribution of property.

Once the judge has considered and weighed these factors, then a ruling will be given as to how to distribute the property and assets.

Handling a Pre-Owned Business Post-Split

The really complex issue involving equitable distribution is when a business is owned by one spouse prior to the marriage. If you or your spouse owns a business prior to your marriage, it’s considered immune from the distribution laws to an extent. 

If the business profits and increases in value during the marriage, the appreciation value is considered a marital asset, only if the non-owning spouse can prove that he or she did something to cause this increase in value.

Let’s look at it this way. Let’s say one spouse owns a car dealership prior to the marriage. If the dealership increases in value over the course of the marriage, that appreciation might be considered a marital asset. If the non-owning spouse did nothing to cause the increase in value, then the owning spouse doesn’t have to share the wealth. 

However, if the non-owning spouse can show that he or she actively worked to help the business expand and grow, they’ll be entitled to some portion of the value of the business.

New Jersey Prenuptial Agreements

If you’re looking for a way to protect your business should you get a divorce, then you need to get a prenuptial agreement before you tie the knot. A prenup is a contract that you and your future spouse sign prior to your marriage that outlines the property each person is bringing to the relationship. 

It also spells out who’ll take those properties with them if they get divorced. If these contracts are entered into willingly and without fraud (i.e., both parties are open to admitting their assets without trying to hide anything), they’ll usually be upheld by courts. But it’s important to have these written by experienced attorneys.

Tips to Keep Your Spouse From ‘Taking Your Business’ in New Jersey

Depending on your circumstances, it may not be possible to protect all of your business assets in the event of a divorce. An experienced Smedley Law Group attorney can help mitigate the situation and prevent you from having to split everything. 

One way is to prove that your spouse had no part in the running of the business and didn’t contribute to its value. Another way is to prove the value of the business is lower so your spouse gets less money. Finally, if a spouse gets a substantial portion of the business, it may be possible to lower their monthly alimony payment to compensate.

Consult an Experienced Divorce Attorney to Protect Your Assets

Just because you own a business and are getting a divorce doesn’t necessarily mean that your spouse is entitled to a piece of it. By consulting with a family law attorney at Smedley Law Group and understanding your rights, you can proactively protect yourself and the company you’ve built.

Contact the Experienced Family Law Attorneys at Smedley Law Group in Maple Shade, NJ Today

If you’re thinking about filing for divorce, you’ll also most likely be dealing with another matter like the division of property and other assets, so you’ll need to speak with a qualified attorney. The New Jersey family law attorneys at Smedley Law Group represent clients throughout the state, including Cherry Hill, Paulsboro, Medford Lakes, and Wenonah. We understand how challenging this time can be for you, which is why we’ll fight hard to protect your interests, and the interests of your loved ones, throughout the legal process. Call us at (856) 251-0800 or fill out our confidential contact form to schedule a consultation. We have an office conveniently located at 750 Cooper Street, Woodbury, NJ 08096.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.