If you’re getting a divorce in New Jersey and own a business, it’s important to know that your company could be considered a shared asset. When your marital assets are divided, there are several ways in which your business might be affected. Knowing what to expect can help you take the right steps for protecting yourself and your enterprise.
Is your business a shared asset?
Whether or not your company can be considered marital property is largely dependent upon where you live. There are nine “community property” states. These are:
– California
– Idaho
– Washington
– Wisconsin
– Louisiana
– New Mexico
– Arizona
– Texas
– Nevada
In a state that operates under community property laws, all property is considered shared, including businesses, and all property is split 50/50 by rule. Conversely, in “equitable-distribution” states like New Jersey, other factors are used to determine who gets what, and how much.
There are several things that you should do to protect your company.
When it comes to claiming a business as a separate asset, there are certain things that you should do to protect the integrity of your claim. For instance, all profits and losses should be kept separate from your personal or shared finances. You can also establish your business as a partnership or a limited liability company (LLC), as these business structures can offer an additional hedge of protection. Finally, it is also in the best interests of company owners to have their spouses sign prenuptial agreements. Your prenup can be solely for protecting your company as a separate asset, or it can include additional protections relating to your personal finances.
Your spouse’s role in the company is also relevant.
The role that your spouse has played in your company’s operations is also vital. If your spouse has made monetary contributions to the company, or contributions of time, these could affect your ability to claim it as a sole asset. When marital assets and business assets are co-mingled in any way, companies are often considered marital property, and all related property division is handled according to state law. It’s additionally important to note that companies established after marriage are more likely to be considered shared assets.
Company owners in New Jersey can take early steps to protect their businesses. Choosing the right business structure, and keeping business finances separate from personal finances can make a tremendous difference in whether or not your company is considered shared property. Diligent efforts to safeguard your company now can prevent you from divorce-related losses in the future.