Lake Forest Business Valuation Attorney
With over 100 years of combined legal experience, our team is highly qualified to provide legal services for your most difficult family circumstances.
Lake Forest Business Valuation Lawyer
When Lake Forest, CA couples divorce, all their property and assets are valued and subsequently divided equitably between them. Dividing marital property, however, is a complex and often contentious process. It can become even more complicated when a business is involved. If you are a California business owner who is experiencing a divorce, find out how proceedings will impact your divorce.
California is a community property state. This means that, in most cases, your business will be in some way divided between you and your spouse during a divorce. To ensure your business is split fairly so that the business stays intact and successful, partner with a Lake Forest asset lawyer.
Qualified Business Valuation Attorney in Lake Forest
Business valuation is an essential process in many legal situations. During a divorce, the appropriate valuation of a business makes a significant difference in your final settlement amount. It is essential, therefore, that you not only hire a qualified business valuation professional but that you work with a business valuation attorney who has experience in both business and family law.
The team at DeArmey Law offers accurate and in-depth business valuation services to business owners in Lake Forest and has extensive experience and skills in representing individuals going through a divorce. We provide comprehensive guidance and counsel through any and all stages of the divorce process and can present a fair business valuation that fully protects your interests and works toward the most favorable outcome in your case.
How Does Business Valuation Impact My Divorce?
When one or both spouses own a business, whether individually or shared, the value of the business becomes a relevant factor in the division of marital property. During divorce proceedings, it is vital that you get help from a qualified business valuation lawyer to properly assess all business assets. Failing to do so puts you at risk for unfair property division and can hurt you monetarily in your final settlement.
The following are some of the most common situations that call for the assistance of a business valuation attorney:
- One or both spouses owned a business before the marriage.
When either spouse owns a business, determining the value is necessary to ascertain how assets will be further divided. During this process, the business can be retained, sold, or divided between the couple. What happens with the business will determine how other assets will be further divided in the divorce, as well.
- One or both spouses acquired a business during the marriage.
In California, any business acquired during the marriage is generally considered joint property. This means that the business, whether it was acquired by only one or both spouses, will be equally divided between each party. Should one spouse choose to keep the business, they must compensate the other spouse for their share of the property. Accurate valuation is, therefore, essential for achieving an equitable distribution of assets.
- One or both spouses suspect hidden assets within the business.
Because all assets and income, including those in a business, are necessary for determining property division, spousal support, and child support, it is vital that the value of those assets be thorough and accurate. If one spouse suspects the other of being in possession of additional assets or undisclosed income arising from a business, they should partner with a skilled business valuation attorney.
Unlike more general business valuation professionals, a business valuation lawyer understands how the value of a business can impact divorce settlements. Your attorney can work closely with you during all negotiations, court hearings, and other divorce proceedings to provide an accurate valuation that considers all relevant laws and regulations associated with your business.
Steps to Value a Business During Divorce
When it comes to determining the value of a business, choosing the right approach can dramatically impact your divorce settlement’s final outcome. Once the court has determined how property will be divided in a divorce, the decision cannot be reversed. Selecting the right method for valuation the first time is essential because different approaches can yield very different results, depending on the circumstances. Generally, a business can be valued using one of three methods:
- Asset approach. The asset approach is the most common approach, as it provides the most accurate representation of the intrinsic value of the business. This approach considers the sum of a business’s total assets against any and all debt and other liabilities.
- Income approach. The income approach provides a broader picture of the investment, offering more insight into a business’s long-term potential. In this method, your lawyer will examine all future earning potential inherent in the business.
- Market approach. The market approach largely foregoes considering asset valuation specific to the business itself and instead looks at market factors. If the business is in a market that is experiencing growth or is otherwise in high demand, your lawyer may be able to appraise the business at a higher value.
Without a certified business valuation attorney, California courts will take the asset approach to gain a tangible valuation of your business. This approach may not reflect investment value, future earnings potential, or an appropriate market value. It is crucial to partner with a knowledgeable and skilled business valuation lawyer who can determine the right method for valuing your business that considers all factors and leads to the most favorable outcome in your case.
How Does California Differentiate Community and Separate Property?
California law offers two different approaches to determining separate property interest and community property interest in business valuation. They each work to help establish the degree to which a business’s value is attributed to one spouse’s efforts during a marriage compared with market factors, contributions prior to the marriage, or other forces.
- Pereira method. This application is used when the personal efforts of a spouse during the marriage significantly contributed to the success and growth of the business. This method attempts to compensate the spouse for their labor based on an estimated appreciation directly related to their efforts.
- Van Camp method. This application is used when little to no contribution was made to the success of the business on the part of the spouse or when the business’s success would be otherwise attributed to external factors, such as market conditions.
California courts will evaluate the circumstances of both the business and the marriage, as well as each spouse’s contribution to the success of the business, and determine the most appropriate method to apply. If you have a business valuation attorney helping you in your case, they will be able to offer a more thorough examination of all factors contributing to the value of the business, presenting you with a more favorable appraisal. This will ultimately positively affect your settlement outcome.
How Will the Valuation Method Impact Tax Planning?
Effective tax planning during a business valuation can ensure that the tax consequences arising from any property division and business transfers are minimized. Spouses can retain a larger portion of their assets by reducing tax liabilities. This will contribute to greater long-term wealth preservation. For example, if a business is being split between both spouses, you’ll want to ensure the settlement agreement factors in the potential capital gains and income taxes of the business.
What Happens When Couples Don’t Agree on the Valuation?
When couples can’t agree on the value of a business, the dispute will often be left to resolve in court. This can occur for any number of reasons. Some of the more common reasons why a difference in valuation can occur among couples include:
- Differing valuation approaches
- Discrepancy in business information
- Emotional attachment and sentimental value
- Subjective assessment of business’s goodwill
- Hidden assets or debts
When a divorce is contested for any reason, especially for differences in the valuation of business assets, you can expect that your spouse will have hired their own attorney to represent their interests. This makes it crucial that you partner with your own Lake Forest attorney. A skilled lawyer can even work to avoid litigation during divorce proceedings through negotiations, mediation, and early assessment of the business valuation.
What Can I Do to Protect My Business?
A divorce shouldn’t ruin a business. Before seeking a divorce, or as soon as possible after being served divorce papers, contact a California business valuation and divorce lawyer who can work to protect your business and long-term interests. To protect your business from some of the common problems caused by divorce, make sure to keep business finances separate, maintaining thorough and accurate records. If possible, work with your attorney to obtain an objective and precise valuation of your business in advance.
During divorce proceedings, it is possible to keep ownership of your business, even with California’s community property laws threatening to divide ownership between you and your spouse. Your attorney can help you negotiate other assets, such as relinquishing a retirement account or real estate, in order to “buy” your spouse out of the business.
Your Business Valuation Representation in Lake Forest
However you choose to proceed, it is vital that you are proactive. Unfortunately, divorce can negatively impact a business in many ways. In some cases, owners may even be forced to sell the business under a court order in order to split the assets. By working closely with a qualified and skilled Lake Forest attorney, like those at DeArmey Law, you can avoid these consequences and protect your business.
If you or your spouse own a business and are seeking a divorce, contact our office to begin partnering with one of our attorneys today.