Experienced Family Law Attorneys Serving Residents of San Diego
In many cases, couples dealing with divorce encounter a range of peripheral but important issues related to the proceedings. One of these issues is determining the value of a business interest. This typically involves attributing a fair market value to the enterprise and then determining how it will be divided. At Jenkins P.C., our diligent family law lawyers work tirelessly to help protect the rights of divorcing spouses near San Diego under California law. Valuing a business accurately can be one of the most crucial elements of the proceedings, since it can have long-term consequences for your economic situation.
The Process of Business Valuation
If you or your spouse has an interest or ownership in a business or professional practice, this asset will typically be valued and distributed as part of the divorce. Given the complexity of business valuations, we work closely with CPAs, accountants, and other professionals who may have special insights to offer.
In order to accurately determine each spouse’s interest in the business, it is important to ascertain whether the company or professional practice is considered community property or separate property under the law. In California, a business starting during the marriage with joint funds is community property, which is to be divided equally at the time of the divorce. On the contrary, a business created prior to the marriage or with separate property is owned by one spouse alone. Generally speaking, separate property consists of money earned or assets acquired before the marriage began, in addition to any gifts or inheritances that one spouse received independently during the marriage.
In some situations, separate property businesses have community property components. This happens when one spouse started the business prior to the marriage with his or her own money, but the other spouse helped grow the business by contributing community property funds that resulted in an increase to the business’ value. In this case, there will be a substantial community property interest in the enterprise.
When it comes to business valuation, a number of factors may be taken into account, including:
- The worth of the business;
- Brand recognition and reputation in the community;
- Comparative values of other businesses or practices; and
- The projected growth of the business.
If required, we also conduct extensive analysis to determine the tax consequences associated with a possible sale or transfer of the enterprise.
In many instances, unless the business or practice is liquidated and the proceeds divided, one spouse may have to buy the other spouse’s share through a cash settlement. One person may also buy the other’s share by paying in installment payments after the divorce has been finalized. A less common but also possible solution is to equalize what each spouse receives in a divorce by using other assets of the marital estate, such as the equity in a home, IRA’s of 401(k) plan assets, securities, and more.
Spouses also have the option of co-ownership at their disposal. This simply means that both spouses would continue to own the business after the divorce is finalized, even though they are no longer married. This is only a possibility if the spouses are amicable and willing to work together once the proceedings end.
Discuss Your Divorce Questions with a San Diego Lawyer
Business valuation in the context of a divorce can be complex and challenging. However, it can make a big difference to the outcome of your case, which is why it is sensible to obtain solid legal representation regarding this issue. If you are contemplating dissolving a marriage near San Diego that involves dividing the value of a business, you should consider consulting the divorce attorneys at Jenkins P.C. Many of our clients have come from Encinitas, Olivenhain, Cardiff, Carlsbad, and Solana Beach. For a consultation, do not hesitate to call us at 858-314-2400.