Business Valuation in a Divorce: No Magic Formula


There’s a chance that you’ve delayed your divorce for financial reasons.  After all, you’ve owned a company for many years.   As far as you’re concerned, your ex-doesn’t deserve a share at all.  Unfortunately, your opinion matters little.   When it comes to determining equitable distribution, your business is considered a marital asset.  Meanwhile, there is no magic formula when it comes to business valuation.

Your reluctance to part with even a small part of your business seems sensible to you.  For one, your spouse’s infidelity could be the root of your divorce. Surely it should matter.  However, New Jersey law does not punish parties even when a divorce complaint is based on fault.  Additionally, it’s of little consequence that you alone worked towards the success of the business.

When it comes down to it, expert opinion is most critical when it comes to business valuation.  Therefore, it’s up to your attorney to retain someone skilled in evaluating companies like yours.  Meanwhile, your spouse’s legal counsel will do the same.  That said, there’s a huge chance that the expert reports will conflict.  So, what happens then?

Business Valuation in Recent Decision

Among other things, the New Jersey Appellate Division recently considered the issue of business valuation in an unpublished legal opinion.  The fact that the decision was not published means that it only applies to the parties involved in the case.  In short, it is not precedential law.

First, a brief review of the history involving the litigants.  Believe it or not, the couple actually went through a forty-day divorce trial.  You should know that this is far from the norm.   In fact, most cases settle to avoid the burden of time and financial constraints.

According to the abbreviated version of the court’s summation of the couple’s history, they married in December of 1997.  They also parented two children; the first was born in 2000 and the second in 2002.  In September of 2007, the couple separated.   A few months later, the wife filed for divorce. 

The issues in this matter involve post-judgment applications.  Essentially, this means that at least one of the parties were not pleased with what occurred at trial.  Notably, the trial court judge issued a 122-page decision outlining this case.

This was not the first time this couple returned to court.   When it comes to understanding the business functions of both husband and wife, they are outlined in another judicial opinion.  The husband worked as a senior manager at a pharmaceutical company. Reportedly, he earned an annual salary of $160,000 as a software engineer.

Meanwhile, the wife’s employment involved the sale of insurance and investment products as an insurance broker through her own business.  Her income was imputed at $93,000 as her earnings were based on commission.

Expert Opinion and Business Valuation

In the Family Court’s decision, the judge valued the plaintiff wife's business at $88,875 and determined the defendant husband's equitable interest to be $33,000.   But, how were those numbers determined?  

Expert reports and testimony were submitted at trial.  Notwithstanding, the trial court found that “the [parties'] experts could not have been more inapposite as to determining fair market value of [plaintiff's] 100 [percent] ownership in her sole proprietorship business."  Case in point, the defense expert valued the business at $237,000.  Plaintiff’s expert found the business to have zero worth and therefore not subject to equitable distribution.

As it often does, the Appellate Division deferred to the trial court’s "special jurisdiction and expertise in family matters."   As far as the Family Court judge was concerned, there were issues with both expert opinions.  The business valuation was therefore premised on “indisputable facts, common sense, and realities.”    In summation, the determination was more of an art form, rather than a formula. 

Contact Us

Are you holding off on filing for a divorce because you own a business?   The Law Offices of Samuel Stoia can provide you with legal advice addressing your concerns.  Contact us to schedule a complimentary appointment.