Columbus Business Valuation Attorneys
Dividing Business Assets during Divorce
When the dissolution of a marriage or a divorce involves one spouse’s business ownership or their interest in a family-owned or closely-held business, it becomes important to determine the value of that interest and to determine what portion, if any, is subject to division as a marital asset. If business ownership or the acquisition of a business interest occurred during the course of the marriage, the value of the spouse’s interest in that business is almost always considered “marital property” and this value must be divided between the spouses in one form or another as part of the divorce settlement.
If the business was formed and business ownership or acquired business interest occurred prior to the date of the marriage, the spouse’s interest in the business ownership may be considered as “separate property” in terms of the division of the couple’s assets and liabilities. However, there may be a spousal interest in any increase or appreciation in the value of the company or business that took place during the course of the marriage. This is even more likely when funds from joint bank accounts or assets were used for business purposes or invested into business ownership while the spouses were married.
How Is the Valuation of the Marital Interest in Business Ownership Calculated?
An effective valuation will most likely involve an expert who is experienced in performing business valuations and who is familiar with the type of business in which the spouse has an interest.
Different valuation experts or firms may be utilized for different types of assets. For instance, the valuation of a partnership in a medical practice and an interest in a large regional car dealership require different approaches and may involve different areas of expertise.
The most common methods used to value the marital property interest in business ownership are:
- The “present sale value” methodology works to establish the valuation of the marital interest in the business if the company was sold today. We must determine what value that transaction would reasonably bring.
- The “earnings multiplier” establishes valuation by multiplying the annual sales or gross receipts of a company by an “earnings multiplier.” Each industry is unique, and the earnings multiplier is based upon several economic and historical factors.
Consulting with Experts
The choice of a respected and knowledgeable expert will help with determination of the value of the spouse’s interest in a business.
We regularly work with a wide range of experts who have performed valuations on many different types of businesses, including:
- Printing companies
- Automobile dealerships
- Real estate investment companies and brokerages
- Law, medical, and professional practices
- Corporations, LLCs, and partnerships of various types
We are also able to effectively work with your existing CPA or financial advisor and to handle complex business succession matters.
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