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If You Own a Business You Should Prepare for a Valuation During a San Diego Divorce

On Behalf of | Dec 17, 2021 | Professional Practice & Business Ownership

If you own a business you should prepare for a valuation during a San Diego divorce.  The process of establishing the value of the marital interest in any business or professional practice is known as “valuation.”  Each party has competing interests in the process of valuation.  A business owner who wants retain their company wants the community interest valuation to be as low as possible.  Generally speaking, the business owner must offset their former spouse’s community interest in the company with other assets or another source of funding.  The spouse of a business owner wants the valuation to be as high as possible.  The greater the valuation, the higher the value of their community interest in the business.

As a business owner you can prepare for a valuation during a San Diego divorce by organizing tax returns for the entity and financial statements for the past 3 to 5 years.  The process of valuation is not usually as simple as “what would a willing buyer be willing to pay a willing seller for this business in a setting where there is no pressure on either party?”  The specific method used to value the marital interest in a business should be based upon the nature of the business itself.  Appraisal experts would use the most appropriate basis for establishing valuation such as:

  • Determining the income generated by the business and multiplying it by a reasonable “factor”
  • Establish the value of all assets and subtract the sum of all liabilities. In this process one must consider the value of Goodwill – the market’s perceived value in the unique skills, experience and reputation of the business owner.
  • Appraisals based upon similar business interests in like geographies which have recently been transacted

What is the best method for establishing valuation of a business or professional practice?  How should a business owner prepare for a valuation during a San Diego divorce case?  The Certified Family Law Specialists at Burke & Domercq have decades of experience and proven results in these cases.  Protect your own interests and contact us or call 760-389-3927 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.