Business Valuation and Divorce in NC

Couple discusses business valuation and divorce in NC with their Raleigh divorce attorney

Business valuation and divorce can be a contentious issue when an ownership interest in a business is part of the marital assets to be divided in a divorce. Although assets and debts are divided equitably between the spouses under North Carolina law, the spouse who is “buying out” the other spouse and providing child or spousal support may try to reduce his or her losses. A strategy may be minimizing the apparent value of the business prior to and during the divorce.

When One Spouse Attempts to Undervalue a Business

As discussed in an article in Forbes, it is not uncommon for a business-owner spouse to engage in financial maneuvering to make a business appear less profitable than it actually is when divorce is pending. This frequently occurring phenomenon has been dubbed “SIDS” or “Sudden Income Deficit Syndrome” by divorce professionals, according to the article.

If you are facing a divorce that involves valuation of a business, it is in your best interest to consult with a knowledgeable divorce attorney as soon as possible. When you work with Charles R. Ullman & Associates, you will have a lawyer you can trust who is certified as a Specialist in Family Law by the North Carolina State Bar and well-versed in the complex process of marital asset division.

Valuing a Business During Divorce

Business valuation in a divorce can be a complex process, often requiring the use of experts and involving a number of factors, including:

  • What the business owns: This includes tangible assets, such as machinery, equipment and inventory, and intangible assets, such as goodwill, patents and trademarks.
  • Amount of debt owed by the business: The business debt can also be distributed among both spouses in a divorce settlement.
  • Profitability of the business: This can be determined by subtracting the business’s expenses from its income.

Method used to determine value:

The two most commonly used methods of valuation are:

  • The book value method: Based on the assets and liabilities listed in the company’s books, less depreciation and adjusted for appreciation; and
  • The market or earnings approach: A valuation method in which the business is valued according to what an outside buyer would pay for it, factoring in capacity for future earnings.
  • Valuation date: Generally, valuation should occur as near to the date of marital asset distribution as possible and should include a date of separation value as well.

Indications of “Sudden Income Deficit Syndrome (SIDS)”

If a business interest is part of your marital assets and divorce is around the corner, you should be aware of the following indications of “SIDS,” as described in the Forbes article:

  • Your spouse’s lifestyle does not reflect the purported loss of business income
  • Your spouse is drawing low pay while the business absorbs personal expenses
  • The date of the apparent loss of business income coincides with the onset of your marital difficulties
  • Your spouse stalls or refuses to turn over financial documents or to allow valuation of the business

An Attorney Experienced with a Business Valuation and Divorce Settlement

At Charles R. Ullman & Associates, our seasoned Raleigh divorce lawyer stands ready to assist you with every aspect of divorce, including distribution of marital assets and business valuation. Contact our firm today to schedule a consultation to address how your business ownership will be part of your divorce settlement.

Sources:

Last updated: April 14, 2015

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