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How is a Business Valuation Determined in a North County Divorce?

On Behalf of | Dec 15, 2019 | Professional Practice & Business Ownership

How is a business valuation determined in a North County Divorce? How is a business or professional practice handled in a Carlsbad divorce?

The first question regarding a business or professional practice in a divorce will be the nature of the asset itself.  Is it “community property” or a “separate asset” under California law?  Generally speaking, property (including the ownership interest in a business or professional practice) obtained by either or both of the spouses during the course of a marriage including the time until they separate is considered to be community property, unless “separate” funds were used to purchase a “separate” business asset.

California law is interested in the value of the business in the time frame of the divorce trial, not at the time of separation or in the years previous to that point in time.  Valuation of the business asset is required when it is considered to be community property, or if some portion of the community’s assets were commingled or used for business purposes during the course of the business ownership.

How is a business valuation determined in a North County Divorce?  The value of business or professional practice is generally quite contested as each party has differing interests in the outcome of the ultimate valuation, especially if one spouse intends to keep the company or practice after the divorce.  The value may be based upon what a willing buyer would pay to a willing seller based upon an expert appraisal, or it may be determined based upon a multiplier of annual gross earnings.

Valuation will also usually consider the entire history of the business, economic and market factors and future opportunity, valuation of fixed assets and real property, Goodwill, any prior sale(s) of an ownership interest in the company or a like company, as well as the profits generated by the company and the accounts receivable of the business itself.

The person who wishes to keep a business after a divorce usually wants a lower valuation, while the other spouse wants the highest possible valuation.  This is due to the community property interest in the company and how it will be divided between the spouses.  If one wishes to keep the company, they would usually reimburse the “community” for half of the valuation, or “offset” that value with other community property such as the equity in real property or investment accounts.

These are complex legal issues, and when substantial assets are at stake you need Certified Family Law Specialists with extensive experience and expertise in these matters.  The partners at Burke & Domercq, APC each have decades of experience representing business owners and their former spouses before North County San Diego divorce courts.

We invite you to review the accolades and recommendations of the legal industry as well as the reviews of our clients and contact us or call 760-389-3927 to schedule an appointment with one of our proven attorneys.  The skill, experience and expertise of our team will make a substantial difference in the successful outcome of your divorce.