Divorce in a family-owned or small business

Each business is complex, consisting not only of tangible assets like buildings, bank accounts, inventory, tools, fixtures, furniture and machinery, but also perhaps intangible ones such as mortgages, leases, patents, trademarks, unlisted stock, skilled labor, accounts receivable and most notably, “goodwill.”

There are numerous approaches to valuing a business, including appraising the assets of the business, looking at comparable sales of like businesses or determining value based on the historic earnings of the business. Many times, the initial formation documents of the business may suggest an appropriate method for determining the value of a member’s interest or shares, and provide restrictions on the transfer of the interest. Other important factors to include as part of the analysis are whether the business was started before the marriage or if the ownership interest was gifted to a spouse by his or her family. These factors could all impact the valuation.

In cases involving small and family-owned businesses, it is important to hire a lawyer who has experience with business valuation issues and to associate with an expert in the field of business valuation to accurately determine the fair market value of the business interest and the appropriate method for valuation.

 

Zach Fruchtengarten is a shareholder in the family law firm Gevurtz Menashe Larson & Howe P.C., with offices in Vancouver and Portland.

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