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Determining The Value of Your Business in a Colorado Divorce

Launching and growing a business can be a challenging endeavor. But the challenge is rewarding when your business takes off and becomes successful. However, divorce can seem like it is putting all of your hard work in jeopardy.

When you or your spouse own business interests, it is necessary to value those interests if you and your spouse divorce, so that the value of those interests can be considered when dividing as marital property.

Having to undertake a business valuation can add complexity, time, and expense to any divorce proceeding. At Halligan LLC, we understand the difficulties that spouses face with business valuations in divorce; the spouse who owns the business interests is reluctant to give up his or her hard work, while the other spouse may be concerned that marital assets are being concealed.

With our background in business, Halligan LLC has had many successes helping clients in divorce cases involving business interests, professional practices, and high assets. Contact us today at (720) 608-2361 to schedule an initial consultation to learn more about your legal rights and options in divorce proceedings.

Couples Frequently Dispute the Value of Business Interests

Unless a couple has a prenuptial or postnuptial agreement setting forth how business interests owned by the spouses are to be divided in divorce, or a spouse can prove all or part of business interests are separate property,  the value of business interests held by spouses will be subject to and considered in equitable distribution of the marital estate, which is the division of marital assets between spouses in divorce.

Even if a business interest was started or acquired prior to a marriage, or all or part of the business interest may be separate property, any increase in the value of the interest during the marriage can still be treated as marital property considered in equitable distribution of the marital estate.

When both spouses own an interest in the same business, it can lead to disputes over whether both spouses will be able to keep their interests or keep working on the business or whether the business interests will be divided.

Calculating Assets for Equitable Distribution, Alimony, and Child Support

In Colorado divorce proceedings, courts will use one of three basic valuation approaches in valuing business interests:

  • Asset-based valuation: The business is valued according to the book value of its assets, minus the business’ liabilities; this approach does not account for goodwill value or discount the value of minority interests
  • Income-based valuation: The business is valued by the income the business is expected to generate in the future; this approach can be used if a business’ earnings and growth rate are predictable
  • Market-based valuation: The business is valued at the price that a purchaser on the open market would pay to acquire the business or business interest; this approach can be used when there are past sales of comparable businesses

If a business has a contractually agreed-upon valuation, such as a buy-sell agreement or recently raised equity financing, courts may look to that as evidence of the business’s value.

At Halligan LLC, our attorneys can help you address many of the common issues that arise in divorce proceedings involving business interests, such as:

  • Accounting issues in a business’s financial statements, like failure to include tax liabilities or improper inclusion of personal expenses
  • True contributions of each spouse to the business, especially when one spouse renders services to the business even though he or she was not formally employed by the business
  • Valuation of emerging-growth and venture capital-backed companies
  • Valuation of businesses in developing industries
  • Valuing a business’s goodwill
  • Conflicting expert valuations

Frequently Asked Questions about Business Interests in Divorce

Does the court have to decide the value of my or my spouse’s business?

Not necessarily. In a divorce, the value of a spouse’s business interests can be determined in one of several ways without the court’s intervention.

First, the business may try to determine its own value; this often does not resolve disputes, as one spouse may accuse the other of undervaluing his or her interests.

Next, the spouses may agree to hire an independent valuation expert to put a value on the business. Alternatively, spouses can hire their own separate experts to see if they reach similar valuations.

However, if, after using valuation experts, the parties cannot agree upon a value of the business interests, they will likely need to turn to the court, which will look at all evidence presented and determine a value for the business interests.

What are some examples of business assets?

Assets that can make up a business’s value include tangible assets such as real estate, vehicles, equipment, bank accounts, or inventory. Businesses can also have intangible assets, such as intellectual property like copyrights, trademarks, and patents. Finally, a business’s value can include “goodwill,” which is the difference between the total value of the business minus the book value of its assets like property, inventory, or intellectual property.

Do I need an attorney for a business valuation during equitable distribution in my divorce?

It is highly advisable to have experienced, knowledgeable legal representation to help you through the process of valuing your or your spouse’s business interests during divorce. An attorney can help you uncover evidence in the event your spouse is trying to undervalue his or her business interests or otherwise conceal assets.

An attorney can also help you focus on the facts and not get swept up in the emotions and tensions of a divorce. Having an attorney can also help facilitate an amicable settlement of your disputes since having legal representation sends the signal that you are prepared to go to trial if necessary.

Contact Our Denver Business Valuation Lawyer Today for Help in Your High-Asset Divorce Matter

It is possible for well-qualified business valuation experts to reach different conclusions about the value of business interests. When you need to determine the value of business interests in your divorce case, it is important that you have knowledgeable, skilled legal representation on your side to ensure that your interests and rights are protected and that you consider the full value of the interests at issue to determine what you are entitled to under the law.

Contact our Denver business valuation attorney at Halligan LLC today at (720) 608-2361 or by reaching out to us online to schedule a consultation to learn more about how our firm can help you navigate this complicated but crucial process.

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