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Business ownership and divorce settlement

On Behalf of | Feb 21, 2018 | Property Division

California business owners who are going through a divorce may face a variety of issues as it relates to creating a settlement. In some cases, the owner’s spouse may attempt to get a share of future profits as well as base alimony demands on the value of the company. This is referred to as “double-dipping”, and it may be possible to craft a final divorce settlement that prevents this from occurring.

There are several potential methods to determine how much a company is worth. For instance, it may be possible to value the company based on how much income it produces and may produce in the future. It may also be possible to compare its value to other companies of similar sizes and in similar industries that have sold recently.

The valuation process generally begins by an appraiser reviewing the company’s financial documents. The appraiser should also be allowed to talk with employees and actually visit a factory or other facilities a company may have. Business owners should also be forthcoming with their income and expenses as this may make it easier to normalize a company’s cash flow. This may make it easier to create an accurate valuation of the business, which may allow for an equitable divorce settlement.

A divorce settlement generally aims for the fair distribution of marital property. While California is a community property state, there are of course certain types of assets that cannot be divided exactly equally. The couple’s respective family law attorneys can often be of assistance in negotiating a settlement agreement.