Business Valuation For Property Division In California
Los Angeles Family Lawyers and CPAs
The law in this area is complex and contradictory. This area of family law is constantly changing because typically nothing is being sold. The biggest problem we have is that there is generally no willing seller.
There are many methods for valuing businesses. They are most simple to most complex:
- Sales proceeds. Here the business is in the process of being sold and once sold that becomes the valuation.
- Comparables. This method of valuation uses comparisons to similar businesses whose value has been determined.
- Liquidation value. This is the value determined by selling off all the assets, then paying all the liabilities of the business. The remaining amount is the liquidation value.
- Book value. This is the value recorded in the accounting records of the business. It is computed by adding up all assets on the balance sheet then deducting the recorded liabilities. The accounting would need to be up-to-date. For this method to be acceptable there would need to be confidence in the accuracy of the books.
- Adjusted book value. This is calculated by adjusting the book value of the assets and liabilities to market value.
- Going concern value. This takes into account that the business is an ongoing operation. It would include any intangible assets such as intellectual property or goodwill.
- Capitalized earnings. This method uses a multiple of the business income.
Date of Valuation
The general rule is that the business should be valued as near as practical to the date of trial. As a practical matter the actual valuation is usually three to six months before the date of trial. Many times the date of separation will be used for the valuation date especially for professional businesses.
John Spurgeon & Associates, serving the greater Los Angeles area, are both family law attorneys and CPA’s with extensive experience in the areas of accounting, income tax, divorce, business valuation and property division under California law. To speak with Mr. Spurgeon about this or other family law issue, please contact us today at 626-440-9518 for a complementary confidential consultation.