Identifying the Value of a Spouse's Business in a Divorce

Identifying the Value of a Spouse’s Business in a Divorce

Pierre Domercq Professional Practice & Business Ownership

What is the process for identifying the value of a spouse’s business in a divorce in Carlsbad or North County?  The most important thing you need to know as the spouse of a business owner is this:

Your spouse will not have anything to say or do with the actual valuation of that business interest. 

That will be determined through a thorough and well structured process.  The Judge in your case is determined to accurately and fully establish the value of the community property associated with your divorce.  The Judge must equitably divide the community property between the two spouses.

The presence of a business or professional practice requires careful scrutiny.

Your spouse is most likely to try to convince you that “The value of my interest is only $x (some artificially low number).  The (operating agreement, partnership agreement, shareholders agreement, buy-sell agreement, corporate documents) specifically state the amount of or process to identify the value of my ownership in the event of death, disability, divorce, etc…”

Yes, there may be legal documents between partners, professionals in a practice, members of an LLC or shareholders of a corporation to establish the value of an ownership stake.  However, our family law courts understand these documents and the valuations contained within are often specifically designed to shield business owners and professionals.  This has no bearing on the actual valuation of the community’s interest in the business.

Identifying the value of a spouse’s business in a divorce in Carlsbad or North County is known as “valuation.”  Valuation is a complex process which is conducted by experts.

Typically you and your ex-spouse will each have experts determine what they believe to be the valuation of the ownership interest.  They will present their findings as well as underlying evidence to the Judge or within mediation to support the process they used to reach this determination and all of the factors (physical assets, liabilities, debts, goodwill) which must be included to establish valuation.  A settlement in mediation or the Judge in your case is what will ultimately establish the value of a spouse’s business in a divorce.

In almost every case, the value presented by the owner of the business interest is far less than the business valuation established by their spouse.  It is in your spouse’s financial interest to get a lower number.  The value of that business community asset must be equally divided between you and your former spouse.  Generally speaking, if your spouse wants to keep their business after the divorce they must pay your portion of the community interest in the business out of their own portion of the community property settlement.  The lower the valuation the less they actually have to pay you to keep it.

Accurately and thoroughly identifying the value of a spouse’s business in a divorce is crucial from a financial perspective.  The experienced Certified Family Law Specialists at Burke & Domercq work to protect our client’s interests and achieve a fair and equitable resolution of these questions.  We invite you to review the strong recommendations of former clients and the legal industry and contact us or call 760-712-3741 to learn more or schedule an appointment.