When you go through a divorce as a licensed professional in New Jersey, your business may often be your largest asset. Standard companies are different. Professional practices hold value in your reputation, unique skills and regular client bases. Because of this, courts may bring in forensic accountants to help determine the value of your firm.
Financial records reviewed by forensic accountants
To separate physical business property from intangible assets, these forensic accountants look closely at your financial history. They may typically review a few specific items:
- Your daily billing records and invoices
- Your past cash flow statements
- Your current unpaid client accounts
A thorough review of these documents is crucial for accurately valuing the practice and ensuring a fair separation of business assets from personal assets during a divorce.
Defining professional goodwill
Goodwill is the likelihood that clients or patients will come back to you because they trust your name. New Jersey family courts look at this in two ways. First, enterprise goodwill belongs to the actual business entity. Second, personal goodwill belongs entirely to you. Your personal degrees, reputation or individual skills build this personal goodwill. Since you typically cannot sell or transfer your personal reputation, state law may keep it out of property division. You can check the New Jersey Courts guidelines to see how judges review these pieces. Getting an exact match on these numbers can be important if you want to seek a fair asset split.
Avoiding double dipping in alimony
A major risk in these divorces is counting the exact same income stream twice. People call this double dipping. New Jersey courts are legally permitted to use the same business income stream to value your practice for property division and to calculate alimony obligations, meaning you could face a “double dip” if the overall distribution is deemed fair by the judge. Balancing this crossover between asset division and alimony takes incredibly strict accounting rules. When you protect your business from getting penalized twice, you can help safeguard your financial future.
Protecting your professional practice
Dividing a professional practice forces you to balance strict court rules with the daily survival of your business. Knowing these legal differences can help ensure that experts view your personal reputation and business assets fairly. Handling your asset valuation and alimony choices with clean financial data can help you protect your career investment while working toward a fair split.
