Business valuation can be one of the most complicated and technical aspects with respect to assets division during divorce. According to North Carolina divorce law, there has to be equitable distribution of all property acquired during the marriage and prior to the date of separation.
When is Business Valuation Necessary?
If business has been initiated after the marriage and prior to the date of separation, it is clearly marital property and business valuation is critical to divide up this marital asset equitably between the spouses. Often one spouse already has a small (or big) business at the time of the marriage. In that case, the business would be technically classified as a separate property of that spouse and as such the other spouse would not be eligible for any share in business. However, if during the course of the marriage, the business has increased in value and become more profitable due to the active efforts of the owner spouse, the increase in value is classified as marital property and subject to distribution. In such a scenario, which is most common, valuing the business becomes necessary.
Factors to be considered in Business Valuation
Business valuation for the purpose of a divorce is different from valuation for sale or for bank purposes for the simple reason that the business is not expected to be sold. Only the value is to be determined to aid equitable distribution. While determining the value of the business, factors such as how well the business is likely to do in the future and the risk factors are also factored into the calculations.
Also there is the issue of ‘goodwill’ associated with the business. This is an intangible asset that many people try to convince the judge to consider in order to arrive at the value of the business.
Finally during business valuation, it is necessary to separate factors like economy, market conditions, etc… that passively contributed to the growth of the business. This part is separate property and hence not divisible.
Business valuation in divorce can be highly tricky, involving highly technical legalities. We at McIlveen Family Law Firm have considerable experiencing in working with experts in valuing businesses for the purpose of divorce. We work with some of the best valuation professionals to arrive at the correct value of the business and ensure that your rights with respect to marital assets and property are always protected.