Business Valuation/Division of Business Interests

Is The Business Subject To Property Division?

The first question that needs to be answered is whether the business is community property and subject to division or whether the business is considered the spouse’s separate property. If a business was formed during the marriage, then the business is usually considered community property. However, if the business was formed prior to the marriage, it is typically considered that spouse’s separate property.

What Is The Business Worth?

Determining the value of a business or business interest can be complex. Where does the value come from? Is it a professional practice in which the true value comes from the goodwill created by the professionals working there? Is there value in the physical property owned by the business? What is the name of the business worth?

Many times, one spouse will receive the business in a divorce and the value received for the business is offset by giving the other spouse more assets or by the business owner spouse paying the other spouse monthly payments over time until the non-business owner spouse is compensated for his or her share of the equity in the community property business. For example, if a spouse owned a hair salon at which he or she worked, it probably would not make sense to give the business to the other spouse who does not work at the hair salon.

We frequently bring in an expert of some sort in these matters. With the help of a business appraiser, accountant or actuary, we will gain a complete understanding of how much the business is worth. Of course, the liabilities of the business cannot be overlooked either. Debts need to be taken into consideration as well when valuing a business.

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