Valuation and Division of Closely Held Businesses During Divorce
Divorce can bring significant emotional and financial uncertainty, especially when a closely held business is involved. For many business owners, their company represents years of work, personal investment, and financial stability. Determining what happens to that business during divorce requires careful consideration of its value, ownership, each spouse's contributions, and the effects of different property division options.
At Haskett Williams Monaghan, we help clients navigate complex family law matters, including divorces involving closely held businesses and other significant assets. Our attorneys help clients understand the financial and legal issues involved in valuing and dividing business interests and work to protect their interests throughout the property division process.
Located in Bend, Oregon, we serve clients throughout Redmond, Madras, La Pine, Sunriver, Prineville, Sisters, and Central Oregon. If a business is part of your divorce, reach out to us to discuss your situation and learn how we can help.
The Importance of Business Valuation During Divorce
A closely held business can be one of the most valuable and complicated assets involved in a divorce. Unlike shares of a publicly traded company with a readily available market price, an ownership interest in a private business may require a detailed review of financial records, operations, assets, liabilities, and other factors affecting its value.
Establishing the value of the business can provide an important foundation for property division. The valuation process may involve reviewing multiple aspects of the company, including revenue history, expenses, ownership percentages, equipment, debts, intangible assets, and relevant market conditions.
A business can also have personal and professional factors that affect its value, including the owner's role in its daily operations and the existence of business goodwill. At Haskett Williams Monaghan, we help clients understand how a business valuation may affect property division and what issues to consider when determining how to address a business interest.
A business valuation isn't simply about assigning a dollar amount. It can provide a clearer picture of an important financial asset and help you evaluate possible solutions for the company's future.
Factors Used to Determine a Business’s Value
Determining the value of a closely held business involves examining its financial and operational circumstances. Because every company is different, the appropriate valuation method and relevant considerations can vary depending on the type of business, ownership structure, and available financial information.
Some common factors that may be considered during a business valuation include:
Financial records: Income statements, tax returns, balance sheets, and cash flow information can provide insight into the company's financial performance.
Business assets and liabilities: Equipment, real estate, accounts receivable, debts, and other assets and obligations can affect the company's value.
Market comparisons: Information about comparable businesses and transactions within the same industry may provide useful context when an appropriate comparison is available.
Owner involvement: The owner's work, skills, reputation, and relationships may affect the company's operations and the valuation of the company.
Future earning potential: Historical performance, anticipated revenue, growth prospects, and other factors may be considered depending on the valuation method used.
A careful review of these issues can provide a stronger foundation for property division discussions. When you have valuation and division of business attorneys assisting you, you can better understand the financial information involved and how the value of the business may affect the overall division of property.
Methods for Dividing a Closely Held Business
After the business interest has been valued, the next issue is determining how it should be addressed in the divorce. Oregon courts divide property in a manner that is just and proper under the circumstances, and the appropriate treatment of a business will depend on the facts of the case.
Possible approaches to addressing a closely held business can include:
Buyout arrangements: One spouse may retain the business interest while compensating the other spouse for an agreed-upon or court-determined share of its value.
Property offsets: One spouse may retain the business while the other receives different property as part of the overall division.
Continued ownership arrangements: In some circumstances, former spouses may continue to hold interests in the same company, although the practical and financial implications should be carefully considered.
Sale of the business: Selling the business and addressing the proceeds through the property division may be considered when retaining the company isn't practical or appropriate.
The appropriate approach depends on factors such as the nature and value of the business, the overall marital estate, each spouse's circumstances, and the practical consequences of the proposed division. Our attorneys can help you evaluate possible solutions and advocate for an outcome that protects your interests.
Challenges With Closely Held Business Division
Dividing a closely held business during a divorce can involve disagreements over valuation, ownership, financial records, and each spouse's contributions. Business owners may also be concerned about protecting ongoing operations while resolving property division issues.
Some common challenges include:
Valuation disputes: Spouses may disagree about the company's value, the information used in the valuation, or the appropriate valuation method.
Incomplete financial information: Missing or unclear records can make it harder to assess the company's financial condition and value.
Personal and business connections: A company may involve family members, long-term employees, or business relationships that complicate decisions about its future.
Tax considerations: Different property division arrangements may have different tax consequences that should be considered before an agreement is finalized.
Oregon law requires full disclosure of assets when a court determines a just property division. Thorough financial information can therefore be especially important when a closely held company is involved. Addressing these issues carefully can help you understand the business interest and evaluate your options before making decisions that may have lasting financial consequences.
Finding Support From Valuation and Division of Business Attorneys During Divorce
Valuing and dividing a closely held business during divorce requires careful consideration of financial records, ownership interests, Oregon property division law, and the long-term effect of different solutions. At Haskett Williams Monaghan, we help clients facing business-related divorce matters understand these issues and work toward appropriate solutions.
At Haskett Williams Monaghan, our central Oregon business valuation and division attorneys help clients protect their interests when a closely held business is involved in divorce. Reach out to us today to discuss your concerns.