What are the basics of a business valuation in a Louisville divorce? Why is valuation one of the most central issues in a divorce which involves a business interest or professional practice?
If the business or professional practice interest was obtained prior to the marriage and a valid prenuptial agreement excludes the asset, and/or no marital funds or labor-related contributions were made by the spouse during the course of the marriage the asset should be considered to be the separate property of the spouse who owns it.
Usually our experienced divorce and family law attorneys would investigate the source of funds used to start the company, the date of the marriage and the timing of the acquisition of the business interest.
If the company was started or the interest in the business or professional practice was obtained during the course of the marriage, a business asset is a marital asset under Kentucky law. Marital assets are to be equally divided between the parties. If the asset is marital property and a business owning spouse wishes to keep their business they must compensate their former spouse for 50% of the value of their equity in the asset. This is often accomplished through other assets such as investment accounts or retirement vehicles.
The marital property interest in the business or professional practice is established through a process known as “valuation.”
Generally speaking the parties would either each separately hire a professional business appraiser, or they mutually agree upon the identification of a business appraisal expert. The nature of the business itself will usually establish the method employed to establish the valuation of the business interest. One method is simple: how much would a willing buyer pay to a willing seller if the business or professional practice were put up for sale? Another approach to valuation involves complicated calculations based upon income and Goodwill associated with the spouse who owns the asset. Another approach places a value on the company’s assets and subtracts liabilities.
The reality of business valuation in a Louisville divorce is the interests of the spouses are diametrically opposed. The spouse who owns the business or professional practice wants the lowest possible valuation. The spouse of the business owner wants the valuation to be as high as possible.
The process of establishing business valuation in a Louisville divorce can be quite contentious. If the parties are unable to agree upon valuation through negotiation the matter could be taken to mediation. Mediation provides the protections of privacy and confidentiality and keeps your private business out of the public record. If mediation is unsuccessful, the matter must be placed before the Judge in your case who will review the evidence at hand and determine the valuation to be used.
This is why it is so important to be represented by the experienced divorce and family law attorneys at Dodd & Dodd. We have represented clients in numerous divorce cases involving a business or professional practice. We will work to protect your interests and achieve the best possible outcome in your case.
We invite you to review the strong recommendations of our former clients and contact us or call 502-584-1108 to schedule an appointment with one of our experienced divorce and family law attorneys.
