Business Valuation As Part of Divorce in New Jersey

September 10, 2010

Money matters often are among the most controversial aspects of a divorce. While other aspects of the divorce may be open to compromise based on the particular interests of the respective spouses, money is ultimately a zero-sum endeavor; every dollar assigned to one spouse is a dollar the other does not have.

Accordingly, issues such as the equitable distribution of property and alimony are at the heart of many disputes. Although these are clearly related issues, they must be considered independently. When a family-owned business has provided a significant source of income for a divorcing couple, these considerations must begin with a valuation of this business.

Valuation of the Business for Purposes of Property Division

As the New Jersey Supreme Court noted in Steneken v. Steneken, "[t]here are few assets whose valuation impose as difficult, intricate and sophisticated a task as interests in close corporations." This is because reasonable people may have different views about the value of the business, and the valuation process itself is not an exact science.

No single formula applies to all situations. When determining the value of a closely-held corporation for purposes of property distribution, New Jersey courts allow three principal methods: the income or capitalized method, the market method and the cost approach method. The ultimate goal is to effect a fair and just division of marital assets.

As the court explained in Steneken, "flexibility must be the byword in determining which approach is best suited in a particular instance." For an effective advocate, mere flexibility is not sufficient. Presuming that the varying methods of valuation will not produce exactly the same results, it is important to strategically select the method to be used.

Determining Alimony

When determining the appropriate alimony levels, the court will consider the supporting spouse's income. However, for a business owner, this salary often includes more than just monetary compensation. An expert must examine both the business owner's income and any additional perks affiliated with the position.

Seek the Advice of Experienced Counsel

When preparing for divorce, it is important to work with experts in the matrimonial field who understand how to properly establish the value of a business for these purposes. Valuation in the context of divorce is not the same as valuation in the context of selling a business.

Additionally, it is important to work with a family law attorney who understands the intricacies of complex property division and alimony arrangements. The advice of a knowledgeable lawyer can prove invaluable throughout a divorce.

Article provided by Laufer, Dalena, Cadicina, Jensen & Boyd LLC
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