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How the Valuation of a Small Business is Established in a Carlsbad Divorce

On Behalf of | May 29, 2020 | Professional Practice & Business Ownership

The process of how the valuation of a small business is established in a Carlsbad divorce will have a substantial financial impact on your divorce.  What happens to a closely-held business in a divorce in Carlsbad Encinitas or Oceanside?  Why is the valuation of the business such a complex legal issue in many cases?

When a small business is considered community property in whole or in part the interest of the community in the business itself must be equally divided during the process of your divorce.  In order to accomplish this, the court must ultimately resolve the value of the community’s interest in the business itself.  A process known as “valuation” occurs to help the Court to determine the value of the small business as well as the community’s interest in that valuation.

There are many proven methods for determining how the valuation of a small business is established in a Carlsbad divorce.  Usually, expert witness testimony provides the court with the valuation in question.  This could represent a “fair market value” based upon recent sales of similar business, a valuation based upon the gross revenues of the business multiplied by an industry standard factor, the value of all assets, inventory and intellectual property or a combination of these.

The process of how valuation of a small business is established is quite financially complex.  The legal challenge lies in the financial interests of the former spouses themselves.

The “owner” of the business interest wants the valuation to be as low as possible as they will have to compensate the other party for half of the value of the business at the time of the divorce.
The other non-ownership spouse wants to see the highest possible valuation as this will result in a larger amount of money at the end of the divorce.  It is not difficult to understand how these competing positions play out in many divorces.

The Certified Family Law Specialists at Burke & Domercq are not only experienced business owners themselves, they have decades of representing business owners and their former spouses before Carlsbad family law courts.  Our attorneys are skilled trial attorneys who aggressively advocate our client’s position to protect their goals and interests.

If you are a business owner, or your former spouse has an ownership in a small business during a Carlsbad divorce we invite you to review the experiences of our clients and the recommendations of the legal industry and contact Burke & Domercq or call 760-389-3927 to schedule an appointment with one of our attorneys with extensive expertise and legal skill in Carlsbad divorce cases which involve business ownership.