business valuations

Oftentimes there is a business or professional practice that must be valued as part of the divorce and division of the community estate. This valuation can be impacted greatly depending on if the business was started before mor after marriage. Due to the specific expertise needed to value a business, a forensic valuation expert is almost always required. The choosing of the right expert can be critical.

There are many options available to a court in determining the ultimate value of a business. The lawyer, therefore, must be skilled and experienced in business valuation cases. For example, a business owned before marriage but which increased in value during marriage as a result of the parties’ efforts in that business during marriage is valued differently that if the owner spouse did little to no work in the business during marriage. A business started during marriage would be valued differently that the above scenarios.

It is important to know that even professional practices that are reliant on the skill, reputation, and efforts of just one party can still have value. For example, a doctor who is a sole practitioner and has patients only as a result of that party’s reputation and those patients would leave and find a new doctor if he or she left that practice could still find him or herself facing a significant value being attached to that professional practice upon a divorce. Interestingly, the same income/profit that is used to value the community interest in that business or professional practice (for which the spouse receiving the business must buy out the other spouse) can then be used to calculate spousal support for the other spouse, if support is warranted.

Because of the complexities of this area of law, regardless if you are the managing spouse (“in-spouse”), or the non-managing spouse (“out-spouse”) it is strongly suggested you speak with an experienced family law specialist before coming to any agreement about the value and/or division of a business or professional practice.