Guest Author: Jason W. LeRoy, ASA, CVA, CFE (Doeren Mayhew)

In many divorce cases, an attorney will recommend the use of a valuation expert when a business is involved.   Valuation experts can help determine the value of a business and are also frequently engaged to determine income available to pay alimony and/or child support, provide expert testimony, and more.

Depending on the facts and circumstances of each case, it may or may not be necessary to have a business valued.  The following are some questions to consider when determining whether or not to retain a valuation expert:

  • Is the business value material to the marital estate?  Often times the value of a business is one of the largest assets in the marital estate.  If this is the case, it is usually recommended to obtain a business valuation.  On the other hand, if the value of the business is likely small or negligible, or if the business doesn’t generate any positive cash flow or hold any significant assets, obtaining a business valuation may not be necessary.
  • Is the value being disputed?  There may be occasions where both parties are involved in or knowledgeable about the business and are able to reach an agreement as to the value of the business themselves.  However, if one spouse is not involved with the business, they may not be comfortable agreeing on a value without consulting an expert.  In this situation the parties commonly retain their own valuation experts but may also agree to jointly retain a valuation expert in an effort to save time and cost.
  • Is all or part of the business separate, gifted, or inherited property?  If a business was started before the marriage or if all or part of the business was gifted or inherited, it may be necessary to determine the value of the business both currently and as of the date or marriage or the date of gift/inheritance.    A business valuation expert can be retained to value the business as of two points in time to determine the change in value, the change in value may be utilized to reflect the “marital” portion of the business value.
  • What is the cost/benefit?  Whether or not the cost of the valuation outweighs the benefit is always a question.  There are several different types of valuation reports that can be prepared depending on the complexity of the business and the need of the parties.  The different types of reports range from a quick calculation to a detailed report which is more costly and usually required if the case goes to arbitration or trial.  A brief discussion with any of the ADAM attorneys or business valuation expert can help determine the type of report required as well as the associated costs.
  • What will happen to the business post-divorce?  There are several different scenarios that can occur when a business is held within a marital estate.  First, the business can be sold and the proceeds divided equally.  In this scenario, it may not be necessary to have the business valued for purposes of the divorce as the proceeds would be divided equally.  Second, the equity in the business could be divided equally between the husband and wife.  In this scenario, it may not be necessary to value the business as both parties will receive assets of equal value.  Third, one party will keep the business and the other party will be awarded an equitable amount of other assets held within the marital estate.  This is the most common scenario and would typically require a value of the business to be determined.

If you have questions concerning the need for a business valuation, the steps involved, or the associated costs, any of our ADAM attorneys would be happy to talk to you or refer you to a business valuation expert.

About ADAM (American Divorce Association for Men)

The American Divorce Association for Men (ADAM) is a group of highly qualified attorneys who advocate for men’s rights in divorce, child custody and parenting time, paternity, support, property settlement, post judgment modifications, and other family law matters. Since 1988, ADAM has been aggressive, diligent, and uncompromising when representing their clients. A team of compassionate and skilled family law attorneys, ADAM is dedicated to being Michigan’s leading divorce attorneys for men.