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Getting Started on the Business Valuation Process in a New Jersey Divorce

BusinessIn a previous blog post, “How the Fair Value of a Business Interest is Determined in a New Jersey Divorce for Purposes of Equitable Distribution”,  James Yudes, Esq. explained the valuation methods utilized by the courts in determining the value of a business for purpose of equitable distribution in a divorce.  In New Jersey, courts are obligated to: (1) identify the assets of the parties; (2) value the assets of the parties; and (3) determine how those assets are to be divided between the litigants. Rothman v. Rothman, 65 N.J. 219, 232 (1974). The obligation to perform the necessary valuation is laid upon both the attorneys and the judge before whom the case is pending. See, Bowen v. Bowen, 96 N.J. 36, 43 (1984); Levin v. Levin, 129 N.J. Super. 142 (App. Div. 1974). See also, Gerson v. Gerson, 148 N.J. Super. 194 (Ch. Div. 1977), and Lavene v. Lavene, 148 N.J. Super. 267 (App. Div. 1977).

In a divorce, a business is generally valued by either a sole, joint or court appointing forensic accounting expert.   A period of discovery will take place wherein both parties have an obligation to disclose the information requested of them pertinent to the business.  If necessary, a confidentiality agreement can be negotiated if there is sensitive, confidential or proprietary information of the business at issue to protect that information.  Furthermore, the business’ books and records will likely examined by forensic accounting experts and counsel.  It is important to note that the less organized the books and records, the more likely additional costs will be incurred in reconciling the documentation produced. Furthermore, depositions will likely be taken of the parties and any individual that may have information pertinent to the business valuation process.  If you are the business owner, it is important to timely compile and produce the items requested of you by both counsel and the forensic accounting expert(s).  Moreover, if your spouse runs the business, it is important to explain to your attorney any and all information regarding the business.  An issue that often comes up is the monetary method in which the business receives payment for its services.  For example, it is important to advise your counsel as to any cash payments received by the business.

Moreover, it is not uncommon that one party has little to no knowledge regarding his or her partner’s business; however, through the formal and informal exchange of discovery, the information regarding the business should be disclosed.  In a divorce involving a business valuation, it is imperative that a party have qualified counsel to protect his or her respective interests in what is often the most valuable asset in the marital estate.

The law firm of James P. Yudes, P.C. has been assisting litigants in complex matrimonial matters involving the valuation business interests for over 35 years.  Our five attorneys have a combined 85 years of legal experience and are ready to assist in finding a creative solution to your needs.