Business Valuation in Connecticut Divorce
Experienced Divorce and Business Valuation Attorneys in Stamford
When a previously married couple files for divorce, their property must be equitably distributed between the former spouses. Usually, the courts will follow what is known as an equitable distribution model to ensure fairness to both parties. The court will label each asset the couple has as either: (1) husband’s separate property, (2) wife’s separate property, or (3) marital property. “Separate property” includes any item owned by one spouse prior to marriage, inheritances received in the sole name of one spouse, and all appreciation on these items. Separate property will remain that spouse’s property after the divorce.
The third category gets trickier. There is no hard and fast rule about how to divide marital assets–that is, everything acquired during marriage regardless of who paid for it or whose name is on the title. A court decides the distribution and considers a variety of factors in making the division. Connecticut courts speak to the issue, but these issues are complex and often considered grey areas in the law. This is particularly true when certain circumstances make dividing assets more difficult. Business ownership, regardless of whether owned by only one spouse, is one of such circumstances.
What is Valuation?
At its core, valuation is determining the monetary value of marital property. Sentimental value aside, it is not difficult to put an objective price tag on a vase or a couch. They are tangible items. Plus, if the parties are unable to come to an amicable resolution, companies like Sotheby’s are famous for helping people obtain the best value for their artwork, jewels, and other fine goods. Auctions are held, bids are made, and personal property is generally easily distributed.
Intangible property is a little more complicated. Things such as businesses, where “worth” is constantly changing, make for a difficult division in divorce cases. When one or both of the spouses own a business, jointly or separately, it is necessary to get a valuation on the business. These valuations are carried out by professionals who understand how present value, economic conditions, and business assets combine to determine the true value of a company. A valuation team may include attorneys, accountants, financial professionals, or a combination. It can be difficult to ascertain a value for a company, especially a newer company, since it lacks years of records, earnings, and statistics. Thus, it is much more difficult to predict the future earning capacity of a new company than a more seasoned one.
Since determining future value of a business can be speculative, many jurisdictions use what is known as fair market value. This valuation approach values the company at how much it is worth to reasonable, willing, and informed buyers at the time of the valuation. This would allow a determination based more on the information readily available to prospective buyers, and less on future speculation. Other states use a “value to the owner” approach, which considers the investment value of the owner. This includes things such as special circumstances that make this particular business more valuable to the current owner than it could be to someone else. Examples of this may include family businesses, small businesses, or niche market businesses.
Why Do I Need to Value My Business?
The relevant Connecticut law does not provide much guidance for business valuation. Since division of assets is ultimately discretionary, it is important to have a fair and accurate idea of what your business is valued at. The statute outlines what types of things should be taken into consideration by a judge when determining distribution of assets, and having accurate numbers will lead you to a more equitable distribution.
By getting your business valued, you do not automatically lose a stake in your company. Many divorces allow for amicable resolution, especially if only one of the parties owns the business. Even if both parties are owners of the same business, it is possible to allow one spouse to keep shares and the other to receive a fair amount in exchange for departure from the company. It is nearly impossible to determine the “fair amount” if the business has not been valued.
Filing For Divorce and Own A Business?
If you or your spouse owns a business and you are filing for divorce, it is critical to obtain an accurate, thorough, and favorable valuation for your company. Our experienced Connecticut business valuation attorneys at Prince Law Group, LLC will work hard to ensure every aspect of your business is looked into. We serve the greater Fairfield County area and corroborate with forensic accounts and financial professionals to ensure accuracy and completeness in valuing your business. Our Stamford, Connecticut office will negotiate the valuation of your business to ensure a favorable outcome, and give you one less thing to worry about during an already stressful time. Please do not hesitate to contact us with any questions about business valuation, divorce proceedings, or any other family law matter.