In this video, Denver divorce lawyer Will Smith explains how it is essential to properly value a closely-held or family business. Whether both spouses own the business as co-owners, or even if one spouse is the owner of the business, it is likely marital property to be equitably divided in divorce. This can be done by agreement or through the use of expert business valuators for one spouse to buy out the other or otherwise split the asset fairly.
It’s extremely common for people to have businesses. Right? Closely held corporations. Small businesses are the backbone of our economy. They’re also extremely difficult to divide in a divorce. Businesses can be large; they can be small. You don’t need me to tell you that. When it becomes an issue in divorce, what’s important is to ascertain the marital value. Right? If one party is keeping the business, they’re not dissolving the business, it’s extremely important that the other party, the party who is not keeping the business, receive fair value. Right? So often times, what’s done, is to value the business. Right? We’re not talking about, often times Walt Disney, we’re not talking about acquiring some large conglomerate. We’re talking about a business that might have significant revenues. But, certainly we don’t want to spend all of the equity, all of the marital assets to get a good value. So it’s important that we right size that. There’s a number of ways to determine the value of a business. Right? In Colorado, the preferred approach is to use the excess earnings method to value a business. Now, that’s a little legally. Right? But for my clients, what I tell them is, look, we know all the experts. We know who to talk to about getting an appropriate joint business valuation in a case where we’re more collaborative. Some cases aren’t collaborative as you can imagine. In a case where we’re not able to agree on someone to come up with a value. We’re often talking about finding our own expert. A singled out expert to provide an opinion. And often times we’re asking them to take all the appropriate issues into account and make sure we come up with an appropriate value. Now once we have a value, then we need to decide, how in the world do we divide the value. But as far as valuing the business itself, experts are key, having good experts, experienced experts, and ones that you can rely on. The worst thing I can imagine is using an expert that you can’t rely on who comes up with a value that’s either too high or too low. The reality is, we need a fair value.
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Divorce Matters® is a Denver Colorado divorce attorney law firm. We provide information and services including the divorce process through the courts, division of marital property, assets as well as debts and parental rights regarding biological and adopted children.
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