Business valuation applied to divorce and marital dissolution litigation: methodology, deliverables, and case-specific considerations.
In a divorce the business valuation is usually the largest and most contested figure in the marital estate, and the valuation date, the treatment of personal goodwill, and the normalization of owner compensation move it materially. The economist normalizes the financial statements for owner compensation, personal expenses, and non-recurring items, values the business under the standard the domestic relations framework applies, and addresses personal and enterprise goodwill where the framework requires the distinction. The same normalized statements support the income determination for support, so the two analyses reconcile.
Valuation of closely held businesses and ownership interests for shareholder and partnership disputes, divorce, estate and gift matters, and buy-sell disagreements. The work applies the income, market, and asset approaches under the standard of value that governs the matter, addresses discounts for lack of control and marketability where they apply, and documents every input so the conclusion can be tested on cross-examination.
The analysis consists of the determination of each spouse's income available for support, including the cash flow a self-employed spouse draws from a business beyond reported compensation; a valuation of any closely held business or professional practice as of the date the governing framework requires; the tracing of separate property contributions and marital funds through accounts, real estate, and investments; a lifestyle analysis where the marital standard of living is at issue; and the present value of pensions, deferred compensation, and other assets that pay out over time. The drivers are personal and business tax returns, financial statements and general ledgers, bank, brokerage, and retirement account statements, compensation and benefit records, and account histories long enough to follow the funds at issue.
We issue the final report and provide deposition and trial testimony and critique of opposing valuation reports.
Enterprise goodwill is value that stays with the business regardless of who owns it; personal goodwill is value tied to the owner's reputation and relationships. Where the framework treats only enterprise goodwill as marital property, the economist quantifies each and explains the basis for the split.
Yes. The methods and reporting are the same whether the engagement is for one spouse, both, or the court, and the report is written so that either side can examine the assumptions.
Request a consultation on Business Valuation or call (201) 343-0700. Plaintiff and defense counsel.