When you are getting divorced in Colorado, you must disclose the value of all marital assets to be fairly divided between spouses. When it comes to ownership of a closely-held business, it is not always simple to value a company for divorce.
There are three commonly-used standards that can determine the value of a business:
- Fair market value: This is how much a business would be worth to a hypothetical, knowledgeable buyer in a competitive and open market.
- Fair value: Used most often when there is no market to offer a comparison.
- Investment value: Essentially the market value for a specific investor with the capability of putting the business to its highest and best use.
Colorado Law and Your Business
Under Colorado law, there is no standard of value specified for closely-held businesses in divorce. That said, there is some case law precedence. In the 1985 case In re the Marriage of Martin, the courts decided that the value of a business is not necessarily dependent on the price set by a willing buyer, but rather dependent on whether the business has more value to the spouse than other tangible assets. This line of thinking was reaffirmed in the 1994 case of In re the Marriage of Graff.
Based on this case law, trial courts are allowed to adopt either fair market standard or investment value standard for valuation of closely-held businesses. Additionally, there may be other factors that affect a valuation in divorce that would not necessarily apply to an arms-length transaction. This might include a variation for lack of marketability, lack of control, minority discount, or other factors that affect the end price.
Work With an Experienced Divorce Modification Lawyer in Denver
If you are going through a divorce, you must present evidence of the value of your business. This can sometimes be a point of contention between spouses. If spouses do not agree on a price, our law firm works closely with independent business valuation experts to prove the case in court.
Our Denver divorce attorneys are skilled in the matters of property division, including the division of closely-held businesses.
