What is the reason for business profitability valuation during a San Diego divorce? How will a valuation work to establish the true value of a business interest or professional practice in a divorce?
The primary purpose for business profitability valuation during a San Diego divorce is to establish the genuine amount of money a business interest generates each year as part of the community property division process. Community property assets and debts are to be divided equally between the parties here in San Diego. This applies to all assets and debts including a business or professional practice.
The first step is to establish the percentage of the business which is “community” property versus that which may be rightfully claimed as “separate” property by the business owner. The next step is to establish the monetary value of that business asset. This is known as “valuation.” The higher the valuation, the more the business owner must pay to their spouse as part of the community property settlement if they wish to keep the business.
It is not unusual for the valuation expert to raise multiple questions during business profitability valuation during a San Diego divorce. The expert will usually begin with tax returns for the past 3 years as well as financial statements and profit and loss reports. It is not unusual for those in professional practice or self-owned business owners to attempt to deduct business expenses which do not actually qualify as deductible under IRS standards. The more deductions they attempt to take the lower the profit of the business and therefore the lower the amount they must pay to keep it.
A thorough business profitability valuation during a San Diego divorce ensures that all streams of income or other assets which increase the value of a company or professional practice are properly identified, accounted for and valued.
Learn more about all aspects of business valuation during a San Diego divorce and protect your own interests. We invite you to contact us or call 760-434-3330 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.