Divorce can become a complicated affair for New Jersey business owners, especially if it involves division of business assets, as it exposes them to “double counting.” It is a commonly overlooked problem by the people who are undergoing divorce. Here is what you need to know about it.
What is double counting?
During marital property division, spouses often encounter double counting where one particular stream of income undergoes accounting for twice: once to calculate the business’s value for a buyout and again to determine spousal support.
Let’s say you own a boutique. During the equitable distribution phase, a forensic accountant uses your shop’s net profits to value the company and you pay a lump sum to buy out your spouse’s share. Later, while determining spousal support, the judge looks at those same boutique profits as personal income to calculate the spousal support. Something seems amiss, doesn’t it? How can you legally count a dollar twice?
The case that set the precedent
Steneken v. Steneken became a landmark case after the New Jersey Supreme Court ruled that it is not necessarily illegal to count the same income twice. The basis for this ruling is the argument that the business valuation and spousal support serve two different legal purposes. However, it also held that the ultimate distribution should remain fair.
What this means for your business
While the New Jersey courts generally allow double counting, every case is treated differently by the court. The judges often factor in your company’s finance and your financial situation before arriving at a conclusion. With the help of an experienced high-asset divorce attorney, you may be able to make a reasonable deal.
