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There are many San Diego divorces that arise in which one of the spouses either owns a business outright or has an ownership interest in a business. When this issue confronts the process of property division that needs to be in accordance with California’s community property laws, the actual value of a business needs to be derived so that the marital estate can be divided equitable and dissolved. Placing a value on a business is a complicated process and it’s one that should only be done with the help of experienced San Diego divorce lawyers. Below is a brief overview of some of the methods used for business valuation.
Comparables is one of the most direct methods of business valuation that is used in San Diego divorce cases. This method basically compares the numbers that comparable businesses in terms of industry and revenue have sold for in the area over a period of time. These numbers are then used to compare the business at issue in order to arrive at a number.
While liquidating a company is a drastic step in furtherance of a divorce case, it can happen. It is also the easiest in which to assign value to each party to the divorce, as in many cases each spouse will simply take half of what was generated when the business was sold or have half of that value applied to their shares of the marital estate.
Capitalized earnings is one of the most commonly used methods for business valuations in California divorce cases. This method almost always requires the help of experienced forensic accountants as it involves an intense analysis of many different financial variables that include revenue, cash receipts, accounts payable, accounts receivable and many others.
Adjusted book value is another business valuation method that can be used in certain California divorce cases, and like capitalized earnings it is almost always done with the help of a forensic accountant. This method also tracks assets and liabilities and is usually performed on a cash basis, although accounts receivable is still relevant.
If you are contemplating a divorce and there is a business ownership involved in the marital estate, you need to take immediate steps to make sure that this process is handled properly. The best initial step to take is to seek the help of experienced San Diego divorce lawyers who have been fighting for the rights of clients for many years. Contact the Men's Legal Center today to schedule an initial consultation.