What is the process of business valuation in a Carlsbad Divorce? Why is the valuation of a business or professional practice often such a contentious issue?
We’ll begin with the second question first. All “community” assets of the couple must be divided during a divorce. If the business or professional practice is in whole or in part community property, the spouse of the business owner has a community interest in the business itself. The valuation of the business or professional practice has a direct impact upon the amount of community property each party will therefore receive.
When the owner of the business or professional practice wishes to keep their business after the divorce they must reimburse the community for the other spouse’s interest in the business. In other words, if the community property interest in the business is $1 million, each spouse would usually receive $500,000 for the valuation of the business during community property division.
Therefore, if a spouse wishes to keep the business in this example they would have to “offset” the $500,000 interest of their former spouse with other assets such as the equity in the family home, investments, stocks, bonds or other assets.
The process of business valuation in a Carlsbad divorce is quite legally complex. There are several acceptable methods to value an ongoing business or professional practice including appraisal by an expert in the field, establishing value based upon multiplying annual income by an industry factor, or the actual amount another party would be willing to pay to purchase the business itself or the owners position within the business or professional practice.
Each side in this process has competing interests. The valuation number offered by the business owner is often much lower than the number proposed by the other former spouse’s experts. Who is right? How is the actual valuation derived?
There are three primary strategies for resolving this issue: negotiation, mediation and litigation. Burke & Domercq, APC attorneys represent their clients in direct negotiations between the parties as well as with opposing counsel. We work in good faith to find common ground and reach an agreement that represents our client’s best interests. Mediation is another option for resolving these questions.
Ultimately, due to the amount of money at stake many of these matters are resolved through trial. Our Certified Family Law Specialists have decades of successful trail experience before Carlsbad family law courts in cases involving the process of business valuation in a Carlsbad divorce. We work to aggressively protect our client’s best interests, as well as their unique goals and objectives.
If you or your spouse own a business or professional practice in a North County or Carlsbad divorce we invite you to contact us or call 760-389-3927 to schedule an appointment with one of our seasoned attorneys.