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Deciding the value of a family run company when undergoing a divorce may be one of the most challenging tasks to handle in Family Court. Usually, only one partner in a marriage runs the business. But, in the event of a divorce, mistrust and suspicion arise.
Here include three general issues on asset division which arise concerning dividing and valuing a family run company:
1. Date of valuation of the company. Typically, the company is valued as near to the date of settlement (or trial) as possible, according to Family Code Section 2552(a). As explained below, however, there might be reasons to value the company at an earlier time, like the date of separation.
If a partner wants this to be done, she or he must file a court motion, pursuant to Family Code Section 2552(b), asking for an alternate date of valuation.
2. Is the company separate property or community property? Commonly, community property will be acquired within the marriage, by one of the partners, through work efforts and/or earnings.
Community property equally is owned by both partners. Separate property, on the other hand, is acquired by one of the partners before marriage, after the separation date, or during any time through inheritance, devise, or gift. It 100% belongs to the partner who acquired it.
A business, however, may contain both a separate property interest and community interest. For instance, a company is born within the marriage, and as of the separation date, the company is 100% community property.
But, the Court does not address the division and valuation of the business for one or two years after the partners separate. Within this time period, the managing partner has been contributing her or his work efforts in order to keep the company running.
In doing so, he or she has been building a separate property interest in what was a complete community property company as of the separation date. Therefore, now the Court must decide the separate property interest value in the company.
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In ascertaining the separate property interest value in the company, there are occasionally disputes as to the part the managing partner played in managing the company. Was the managing partner a key part of the company?
Would the company have failed but for his or her efforts? Or, is she or he merely a cog within the machine? Could anybody have done her or his job? Depending upon the answers given, the separate property interest of the managing partner could be greater or lesser.
Occasionally to avoid this asset division Issue of valuing the separate property interest within the company, the Court might entertain a partner’s motion to value the company as of the separation date.
3. How much is the company worth? Assuming the company’s books are kept current, it is simple to prepare a business balance sheet. The balance sheet lists all the company’s hard liabilities and assets.
The difference in the two determines the company’s equity. But, what’s excluded from a balance sheet includes the company’s goodwill. Goodwill includes an intangible asset which isn’t simple to value. Thus, usually, in a family law case, a forensic accountant is consulted to ascertain the business value, which includes its goodwill.
As there is both a separate and community property interest within the company, a forensic accountant may provide opinions as to the value of all portions of the company.
You Need to Contact Us For Best Services Now
If you own a business and are considering or are in the process of filing for divorce, Contact The Law Offices of Aliette Hernandez Carolan, PA in Miami, Florida, at (305) 358-2330 or fill out our easy inquiry form for more information on the division of assets, including what is involved in the process.
The divorce attorneys at The Law Offices of Aliette Hernandez Carolan, PA will work with you to ensure that you receive justice when it comes to the distribution and division of assets.
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