MESSY BUSINESS OF BUSINESS VALUATIONS DURING DIVORCE

One of the most complex issues to deal with during divorce is figuring out the value of a business and a fair way to split this asset. In long term marriages, where couples are together 20 or more years, many marital assets may end up getting divided 50/50, and the marital value of those assets- like cars and houses, are usually easy to determine. Not so with businesses. Often it is not a neat 50/50 split. In many instances, New York courts have awarded shares ranging anywhere from %0 percent to 30% to the non-owner spouses- looking at various factors such as:

• Was the business started before the marriage or during the marriage?

• Were marital funds used to start or grow the business?

• What functions, if any, did the non-owning spouse provide to the development and success of the business?

• Will the spouse continue to play a role in the business post-divorce?

Business Valuation Experts are Needed- In order to evaluate a business accurately and effectively, forensic business analysts and accountants are often retained to assist divorce lawyers and divorce mediators. I won’t bore the non-CPAs who are reading this with listing out all the possible business valuation methods, but let’s just say there are many methods, and a business valuation expert can explain the appropriate methods for the types of businesses at issue. In mediation, we use one neutral expert that both sides feel comfortable with and agree upon to keep the costs down. In litigation, you often find that both sides will retain experts, and there will be a battle between those two experts, including costly reports, depositions, and hearings. Not surprisingly, the non-owner’s spouse will usually have an expert that comes up with higher valuation figures while the business owner’s expert will produce much lower valuations.

Bottom line, what makes the most sense, and saves dollars and cents, is to get one reputable neutral business expert and to mediate this issue affordably.

Yes, I am an attorney but I’m not your attorney and this article does not create an attorney-client relationship. This article is legal information and should not be seen as legal advice. You should consult with an attorney regarding your situation before you rely on this information.