Valuing a small business within divorce proceedings can be a complex undertaking for family law attorneys. It often entails collaborating with a Certified Public Accountant (CPA) and gaining access to various financial records, including tax returns, bookkeeping files, and comprehensive information on assets, inventory, cash flow, and debts. Even with the involvement of a CPA, the expertise of a divorce attorney remains pivotal, particularly when dealing with the valuations of small businesses.
In the realm of divorce, asset division frequently stands as a contentious matter, rivaling child custody and living arrangements in complexity. The situation becomes considerably intricate when a couple jointly possesses a business or when one spouse plays a significant role in establishing a prosperous enterprise. However, such scenarios are relatively infrequent, and not all divorce attorneys are equipped with the requisite proficiency to accurately assess the value of a business while safeguarding hard-earned assets from unwarranted division.
The core of a business valuation revolves around both spouses collaboratively appraising the business and its assets. The motivation for both parties to provide a precise assessment is substantial, as an inaccurate valuation can result in the court mandating the sale of the business. This outcome leads to the total forfeiture of the business, with one party forfeiting the potential financial benefits of a buyout and potentially receiving a substantially reduced payout. The valuation process also takes into consideration the income derived from the business by both spouses, any loss of income attributed to one spouse’s contributions, and its influence on calculations related to spousal and child support. Additionally, the court factors in various elements, including the economic climate, the parties’ accessibility to capital, anticipated and historical earnings, and the respective roles of each spouse in the operation of the business.
To ensure an unbiased valuation, both parties should engage in securing an independent assessment, given that judges typically demand expert evaluations. It is not uncommon for business owners to undervalue their companies strategically, either to reduce buyout costs or evade the sale of the entity. When selecting an expert evaluator, it is imperative to assess their qualifications, continuous education, practical experience, and recognition by family law courts as an expert in the valuation of small or family businesses.
In the event of a divorce involving a small business, it is critical to promptly seek tenacious and proficient legal representation. Our seasoned attorneys at Simon Law Group are well-equipped to assist you in safeguarding the business you have tirelessly cultivated. Do not hesitate to reach out to us for a free consultation today!