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How to determine the value of a business in a divorce

On Behalf of | Aug 29, 2016 | Divorce

California couples who are divorcing might also own a business together, or only one of them may own the business. In either case, it is necessary to get the value of the business. This can be done either through what is called a “full valuation” or a “calculation of value.”

With a full valuation, a valuation analyst will do a more thorough job. It will also cost more and take more time. However, a full valuation may be necessary if the information will be passed to a third party such as a judge or an arbitrator. It may also be necessary if the business is particularly complex.

A couple negotiating the terms of their divorce amicably or using mediation might be able to use a calculation of value. Although it may not be as accurate as a full valuation, it will also be cheaper and quicker. Couples who would prefer that their divorce move along faster might also choose a calculation of value.

California is a community property state, so the process of dividing marital property will begin by determining what that marital property is. For example, if a person entered the relationship with a sum of money that was never mixed with marital accounts, then that sum might not be considered marital property. However, determining what share of a business each person should receive may be more complex. For example, one person might have owned the business before the marriage and the other spouse might not have worked in it, but that spouse might argue that their contributions to the home and family made it possible for the other person to build up the business.