If you own a company that you started during your marriage, New Jersey courts consider the business marital property and will divide it equally in a divorce. If you started the company before your marriage, your spouse could receive half of the increase in value of the business during the marriage.
Consider these strategies to prevent losing a significant chunk of your business in a divorce settlement.
Separate company accounts
Keep careful financial records for your business and avoid commingling personal or household funds with company funds. Completely distinct accounts are best for legal and tax purposes.
Create a contract
You can designate your business as separate property with a prenuptial or postnuptial agreement. With this legal document in place, you will retain full ownership of your company if your marriage ends. You can also specify a percentage of increased value your spouse would receive in the event of a divorce. Otherwise, he or she could receive half the business equity. If your business has a partnership agreement, LLC agreement or bylaws, it should specify the claim each partner’s spouse has to the business in a divorce.
If your spouse does not participate in the daily operations of the business, you can argue that he or she has a limited claim to the value of the business. Maintain written records indicating your spouse’s level of involvement with the company.
Take a salary
This may sound counterproductive, but you should pay yourself a healthy salary as the founder and CEO of your company. Otherwise, your spouse could argue that he or she should receive a share of the business proceeds because you did not contribute income to the household during the marriage.
The right protective strategy for you depends on the size and structure of your business along with other factors.