Divorcing as a Business Shareholder or Investor
Protect Your Business Investments from a Marital Meltdown in New Jersey
The current economic impact of the pandemic has forced businesses, entrepreneurs, and married couples or those in a civil union to step back, assess how things are going, adapt their strategy, or pivot in another direction. Though some may say the structure for a marital partnership or merger of marital assets is quite similar to a company’s: vision, identity, net gain, long-term goals, responsibility to stakeholders, others might see it like flowers that need to be constantly watered and nurtured.
As a potential marital asset, when a couple who owns a business together, has considerable investments tied up in a company, or one is an entrepreneur, there are additional significant factors they will need to consider when they consider starting the divorce process. If they own a company together, regardless if it’s a brick and mortar store or an online presence as in the case of many social media ambassadors, the couple will need to decide if and how the business will be operated during and after the dissolution of the civil union or marriage.
As is often the case when a high-asset divorce occurs involving large business investments, other interested parties often worry that it will lead to significant changes in the company’s leadership or its growth prospects. When not planned properly the dissolution of a marriage can mean the dissolution of a business. For some, it could mean sharing certain details with your angel investors, shareholders, partners, banker, to get a better understanding of whether they are ready to support not only you but the company during this crisis period. For others, it’s about not scaring off would-be investors due to debt, the division of assets, or a drop in stock value due to market volatility. So while your marriage may collapse because of divorce, planning ahead and talking to an experienced New Jersey business division attorney, means your business doesn’t have to.
Are Shares in a Business Considered Marital Assets During Divorce in New Jersey?
New Jersey is an “equitable distribution” state, which means that marital property must be divided in a way that is equitable or fair after a proper evaluation of assets has been conducted.
Let’s take an example to understand this concept more fully. Businesswoman, novelist, and philanthropist MacKenzie Scott did not have a prenuptial agreement prior to her 25-year marriage to Jeff Bezos. Her direct involvement in Amazon contributed to the increase in value of the business during the marriage thus establishing the company as marital property. Currently as a minority shareholder and receiving dividends (but possibly having no board representation rights and no other meaningful rights to veto how the company is run) the divorce settlement has ensured that Ms. Scott and her children are well-positioned to thrive – the children as they mature and she in her future business and global philanthropic endeavors.
Accurate record-keeping and maintaining separate business and marital banking accounts make the financial disclosure or case information statement (CIS) for distinguishing marital from a personal property easier. If your family business records do not tell show the complete picture, our business valuation and financial experts investigate tax statements, individual accounts, and related liabilities to better understand which assets may be hidden or tied up in the business and how to secure a fair division resolution for your unique needs and family situation.
At The Law Offices of Edward Cooper, Esq, our marital agreement attorney has helped many clients across the greater Middlesex and Union County area to draft fair and effective prenuptial as well as postnuptial or mid-marriage agreements. We help our clients to understand that having a prenuptial agreement does not mean either party will eventually want a divorce, merely that it is a prudent and smart step for any couple to take.
Our smaller firm size allows us to offer personalized legal solutions when it comes to drafting, modifying, contesting, or validating a prenuptial agreement and which focus on the unique needs and concerns of each of our divorce and family law clients.
Do I need a NJ “Corporate Prenup?” Pre-Marriage Steps To Take to Protect Your Assets
More than ever today’s couples should contact a keen legal mind to get insight regarding privately owned tangible physical property, intellectual property, and created online content. We can help draft an agreement regarding the potential future sale of your business interests to an ex-spouse, research options to prevent or reduce any potential IRS tax penalties or ensure that these properties remain under your control and unaffected during the dissolution of a financially co-mingled relationship. This drafted document can also include:
- student loans
- digital assets/social media (Etsy, Instagram, Facebook, Tik Tok, Twitch, & Linkedin)
- pet custody
- stay-home parenting or cohabitation agreement for unmarried couples
Special attention should be paid to any contractual agreements a couple may have with a brand regarding which account will be used and which social media channels may be run by a social media marketing agency.
Are Any Assets Protected from New Jersey Divorce Property Division?
Each party in a marital property dispute may seek exemptions to the equitable distribution process, such as:
- engagement rings or gifts given or received prior to the marriage
- some investments, retirement accounts, pensions, which were held before marriage
- third party gifts (i.e., inheritances, trusts)
- student loans
- debts accrued illegally, fraudulently, or deceitfully
In the case of some family businesses, the court may have to examine the company structure to determine the control of the company, the type of shareholding, and share classes.
The continued participation of both willing and able spouses in the business post-divorce can be an option despite their personal feelings, if both parties draft an agreement to do so with respect and professionalism by defining roles, detailing their rights, and clarifying any options to sell their share at a later point in time.
Could An Alimony or Child Support Claim Impact My Business Valuation?
A business valuation in New Jersey usually requires the capitalization of existing income streams. Often the same source of income used to determine the fair value of a business today and in the future will help determine the most accurate financial amount necessary for your soon-to-be-ex-spouse and children’s support order. Furthermore, a valuation doesn’t always prevent a double-dip in asset distribution and alimony or counting a marital asset in allocating property and a second time in awarding spousal support. That’s why it’s advisable to have a Clark attorney with a deep understanding and familiarity with this sophisticated area of the law, by your side to protect your interests.
Is Negotiation or Mediation Better for Dividing a NJ Family Business During a Divorce?
This is another aspect of your divorce case that you should discuss with your attorney as early as possible. Dividing a family business is made even more challenging in the shadow of divorce litigation, and made more complex by having to sell the business, buy out the other party, or split the profits, in addition to creatively navigating asset division, retirement assets, pension plans, the division of property and debt.
In light of the current backlog of family law cases before the New Jersey Family Courts, negotiating or mediating your divorce can be less time-consuming and more cost-effective.
Questions about how to protect the effort invested in your business? Contact Divorce Lawyer Edward Cooper for Assistance
Mr. Edward Cooper, Esq, has experience helping clients and families to fairly and accurately value and divide complex assets. We are also known for providing constructive and effective legal solutions in towns including Westfield, East Brunswick, Colonia, Union Township, South Brunswick, Green Brook, and nearby communities.
We consult with forensic accountants, computer specialists, and financial specialists to obtain valuable information on both the current and future value of all of your financial assets and then work towards securing a favorable and equitable agreement for you.