Business Valuation in Divorce Cases

Divorce And Business Valuation

When it comes to issues surrounding divorce, business valuation is often an important concern. The business may be considered marital property and as such, it is subject to division. In order to divide the business in a fair and equitable manner, however, the value of the business must be determined.

When it comes to divorce and business valuation, the person who is involved in the day-to-day operations of the business may well understate the value of the business. The other spouse would do well to seek an independent evaluation, as opposed to relying on his or her former spouse to provide this much-needed information.


Significance Of Business Valuation In North Carolina Divorce

Business valuation can be one of the most complicated and technical aspects with respect to assets division during divorce. According to North Carolina divorce law, there has to be equitable distribution of all property acquired during the marriage and prior to the date of separation.

When is Business Valuation Necessary?

If business has been initiated after the marriage and prior to the date of separation, it is clearly marital property and business valuation is critical to divide up this marital asset equitably between the spouses. Often one spouse already has a small (or big) business at the time of the marriage. In that case, the business would be technically classified as a separate property of that spouse and as such the other spouse would not be eligible for any share in business. However, if during the course of the marriage, the business has increased in value and become more profitable due to the active efforts of the owner spouse, the increase in value is classified as marital property and subject to distribution. In such a scenario, which is most common, valuing the business becomes necessary.


Business Valuation In Divorce Is Different

by Steve Popell on April 15, 2010

In most business valuations, the standard is "fair market value.”  This method seeks to determine what a hypothetical "willing buyer” would pay a hypothetical "willing seller” in a hypothetical "free market” in which both buyer and seller are in possession of all material facts and neither is forced to make a deal.

In a divorce, however, the buyer and seller are known.  Typically, the manager-spouse "purchases” the community property interest of the non-manager-spouse through the process of community property division.  The standard of value in this case should be "investment value,” because it reflects what it is worth to the manager-spouse to own all of the community’s interest in the company, rather than just his or her community property half.


Business Valuation In Divorce

If one spouse owns or co-owns a share of a business, it becomes a major asset in divorce and raises key questions for property division: What is the value the business? How is the business to be divided? What portion of the business is separate property? What portion of the business is community property?

The Law Offices of Thomas M. Polinger has extensive experience in business valuation and in division of marital assets. Our lawyer has represented owners of small businesses and professional practices — or their spouses — in divorces throughout the South Bay area and Los Angeles County.

We have the resources and experience to reach consensus on valuation of the business, and the creative touch to find the solution in property division. Call us at 310-697-8868 to arrange a consultation.


Posted by