Business valuations and adjustments to divorce settlements

Business ownership in North Carolina creates many variables for married people to consider when they pursue divorce. Sometimes, both spouses own roughly equal shares. However, it’s more likely that only one spouse has a controlling stake in the company. The spouse who has enough shares to exert control might try to skew the valuation of the business to influence the outcome of the divorce settlement.

Attempts to reduce a business’s value on paper include hiding assets or downplaying their potential value. Another tactic pumps up expenses and liabilities. A business owner might also assign personal legal expenses to the business. An independent appraiser conducting a valuation investigation might uncover these issues, which could enable the accurate financial disclosure of business assets during divorce negotiations.

Even if there are no deceptions, the divorcing parties will still need to decide how to apportion the value from the business or base spousal support payments on future business income. Because future business income is not entirely predictable, the former spouses sometimes make reasonable adjustments. They might be guided by the market value of an owner’s contribution to the operation or compare the business to similar enterprises. Nonstandard accounting practices, like cash-to-accrual, or nonrecurring income or expenses might also require adjustments to the settlement so that it represents an equitable split between the two parties.

In addition to business assets, a person involved in a high-asset divorce might have various real estate holdings, multiple retirement plans and an inheritance to divide or protect. An attorney could investigate each asset to determine their status as marital or nonmarital. These insights could support the spouse’s position during settlement negotiations. When disputes cannot be resolved, an attorney could prepare to litigate the divorce.

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plumides, romano & Johnson, pc

PHONE: 704-333-9900

FAX:   704-358-0536