We've all heard the stories of greedy individuals who fight tooth and nail to make sure they receive every last penny they're entitled to from their spouse's business. Then, there are the individuals who were happy to walk away with what they suspected was far less, but proving it would have cost even more time and money. In truth, proving that a business valuation is fair can be an incredible amount of work. Each party's attorney, usually with assistance from a forensic accountant, calculates a value based on what they feel are the relevant factors. Hopefully, the figures are close enough so that both sides can negotiate a number that's in between the two values. If the figures are radically different, as it is in many cases, then it's back to the drawing board, or perhaps deferring the decision to a judge.
Either option is frustrating and expensive, but a fair business evaluation is an extremely important aspect of equitable distribution. Unlike communal property states, New Jersey laws focus on what's fair based on the factors within your marriage. Still, the foundation of any property division agreement is the accurate listing and valuation of every asset and liability that a couple acquired during, and before the marriage. By settling for a figure just to get it over with, you could be receiving far less than what you are entitled to under the law. You could also be setting a precedent for manipulation and unfair treatment in other areas of your divorce. On the other hand, there is a time and place for compromise if the figures are not too far apart.
So, just what is a fair valuation method, you ask? That depends on a multitude of factors, but there are certain objective factors that can be used for guidance. Reasonable compensation, for example, is the comparison between an amount that is being paid to one party versus the amount that would need to be spent in order to attract an employee of similar skill. This figure can be adjusted, based on factors such as whether the business is a separate or marital entity. If the business is a separate property (acquired before the marriage), the receiving spouse would have a share in the equity, rather than the actual business itself. If the property was acquired during the marriage, you would need to consider numerous factors such as the date of the marriage, when the business or interest in the business was acquired, and the financial and non-financial contributions made by both spouses.
This is just the tip of the ice burg in the valuations process, which is why it's not surprising that two parties, with their own lawyers and accountants, often arrive at two totally contrasting values. Whether you should push for another assessment, or settle for what you can live with depends on your own personal and financial circumstances. For assistance with business valuations, or any other divorce-related issues, please speak with the attorneys of Villani DeLuca, P.C.