By John S. Eory
on August 24th, 2016
Posted in Divorce
Many divorce cases include a
determination of the value of a business for purposes of equitable distribution
between the parties. Whether the business in question is a sole proprietorship,
partnership, or corporation, establishing a sound and supportable value is
essential.
The first step is to engage a
skilled valuation analyst. The second and equally important step is to
determine the appropriate level of service to be provided; that is, whether the
analysis should be, in technical parlance, a “calculation of value” or a “full
valuation.”
One not exclusive rule of thumb is whether the
valuation report may ultimately be relied upon by a third-party, such as a
Judge or an arbitrator. In such cases, a full valuation is more appropriate. In
other settings, such as mediation, a calculation of value may suffice.
A full valuation will provide
a greater certainty and reliability, but almost always takes longer and is more
costly. Conversely, the time and cost savings for a calculation of value are
offset by a more limited scope and lesser degrees of both certainty and
reliability.
Not every divorce case
warrants a full valuation at the outset, especially if the parties are inclined
to find areas of compromise and agreement, rather than resistance and mistrust.
Further, it goes without saying that some businesses are simply more complex
than others, which may require a full evaluation. The decision on how to
proceed is made on a case-by-case basis, depending on a variety of factors,
including the parties’ interest in a more efficient closure than the judicial system
can provide.
In all situations it is
essential that the attorney be experienced in family law matters and that a
high degree of teamwork exist between the client, attorney, and valuation
analyst to assure a successful outcome.
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