Dividing a Business in a New Hampshire Divorce

A business started or developed during a marriage is marital property under New Hampshire's all-property rule — regardless of whose name appears on the corporate records, who runs it daily, or who came up with the idea. Under RSA 458:16-a, the court has authority over all property owned by either spouse, which includes sole proprietorships, LLCs, partnerships, S-corps, professional practices, and even a spouse's interest in a business owned with third parties.

Even businesses started before the marriage aren't automatically protected. In New Hampshire, the court can divide any asset; the question is how much of the business value the non-owner spouse should receive.

Three Approaches to Business Valuation

New Hampshire courts accept three standard valuation methods. The appropriate method depends on the type of business, its size, and how its value is generated.

Income Approach

This method values the business based on its expected future earning capacity. The most common version is the "discounted cash flow" analysis: project the business's future net income, then discount those future earnings back to present value using a rate that reflects the risk of the business.

The income approach works best for established businesses with predictable revenue — professional practices, service businesses with recurring clients, manufacturing operations with stable contracts.

Market Approach

This method compares the business to similar companies that have recently sold. If three comparable dental practices in Northern New England sold for 70-85% of annual gross revenue, that range provides a basis for valuing the practice in question.

The challenge is finding genuinely comparable transactions. Small, local businesses often don't have public sale data, and the details of private transactions are rarely disclosed.

Asset Approach

This method calculates the net value of the business's tangible assets (equipment, inventory, real estate, accounts receivable) minus its liabilities (loans, payables, obligations). It works best for asset-heavy businesses — construction companies, manufacturing operations, real estate holdings — and for businesses that are being wound down rather than sold as going concerns.

The Personal vs. Enterprise Goodwill Problem

"Goodwill" is the intangible value that makes a business worth more than its physical assets — brand reputation, client relationships, location advantage, trained workforce. In divorce valuation, goodwill creates a significant dispute.

Enterprise goodwill belongs to the business itself. If the business could be sold to a new owner and customers would continue coming, that's enterprise goodwill. It's transferable and clearly part of the marital estate.

Personal goodwill is tied to the individual owner. A doctor's reputation, a lawyer's personal client relationships, or a consultant's individual expertise can't be sold to someone else. When the owner leaves, the goodwill goes with them.

New Hampshire courts generally avoid forcing co-ownership of a business post-divorce. The typical outcomes are:

• Buyout: the owner-spouse keeps the business and pays the other spouse their share of the marital value
• Offset: the business value is offset against other marital assets (e.g., the non-owner spouse gets the house and retirement accounts while the owner keeps the business)
• Forced sale: rare, but the court can order a sale if neither party can afford a buyout and no offset arrangement works

What the Non-Owner Spouse Should Watch For

The owner-spouse controls the books, which creates an information asymmetry. Common tactics to suppress valuation include:

• Accelerating expenses before the valuation date — prepaying rent, equipment leases, or insurance
• Deferring revenue — delaying client billings, postponing contract signings, or booking revenue in a later quarter
• Increasing owner's compensation — raising salary, bonuses, or perks to reduce reported profits
• Creating unnecessary expenses — hiring family members, leasing personal vehicles through the business, or padding travel expenses

Rule 1.25-A mandatory disclosure requires three years of business tax returns, which creates a baseline for spotting anomalies. If business revenue suddenly declines in the year of divorce after years of steady growth, the pattern itself is evidence that warrants scrutiny.

When You Need a Forensic Accountant

For businesses with revenue above $500,000 or complex ownership structures, hiring a forensic accountant or business valuation expert is usually worth the cost. They can:

• Normalize the financial statements by removing owner perks and one-time expenses
• Apply the appropriate valuation methodology
• Testify in court about their conclusions
• Identify income suppression or hidden revenue

The court can order both parties to share the cost of a neutral valuation expert, or each party can hire their own. A neutral expert often leads to faster settlement because both sides receive the same number.

Protecting the Business During the Divorce

The anti-hypothecation order that automatically takes effect when a divorce is filed prevents either spouse from selling, transferring, or encumbering business assets. But the order doesn't prevent normal business operations — the owner can continue running the business, paying employees, and serving clients.

The concern is a spouse who intentionally runs the business into the ground to reduce its value. If you suspect this, document the decline with financial records and raise it with the court. Intentional waste of marital assets is one of the statutory factors under RSA 458:16-a, II that justifies an unequal split.

The New Hampshire Divorce Financial Split & Asset Division Guide covers the business valuation process with a corporate document checklist, a framework for evaluating which valuation method fits your situation, and worksheets for structuring a buyout or offset arrangement.

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