If an interest in a small business or closely held business arises during the marriage, divorce will typically involve the distribution of the business to one spouse; a buy-out of the other’s interest is often necessary, as divorcing spouses cannot be expected to work together. However, where spouses will have little contact, the court may award the business to both spouses. Sometimes a trustee may be appointed to oversee the operations of the business.
To determine the buy-out price, parties must rely on expert opinions. The valuation most commonly performed is according to the price that a business could attract in the open market, that is, what a willing buyer would pay a willing seller when neither is under any pressure to buy or sell. Relevant factors include: 1) the nature and history of the business; 2) the economy and economic outlook; 3) book value; 4) earnings; 5) dividends; 6) intangible value such as goodwill; 7) actual sales similar companies; and 8) the stock value of similar publicly traded companies.
The “goodwill” of a business may or may not be appropriate for valuation. “Goodwill” is an intangible asset that may be defined as the reasonable expectancy of repeat business that will ultimately generate more revenue than the assets of the company alone. Accordingly, most any successful business will have goodwill; however, if the goodwill is solely due to the positive reputation of a single person, such goodwill will not be something that can be distributed in a divorce.
At Wilder Mahood McKinley & Oglesby, we are highly skilled in navigating the waters of a complex divorce, where high value assets, such as a small business, may be involved. Indeed, “we wrote the book” on it. If you have concerns regarding the impact a separation or divorce may have on your business, contact us for a consultation.
Wilder, Mahood, McKinley & Oglesby is one of the oldest firms in Pittsburgh focusing on family law issues. Our founding partner, Joanne Ross Wilder, penned the handbook used across the state by practitioners and judges in the family law arena. Our attorneys, Brian E. McKinley ,Darren K. Oglesby and Bruce L. Wilder update the book annually to keep current with changes in the law and society. To consult with a Pittsburgh divorce attorney about your options in a divorce, contact us online or by calling 412-261-4040. We represent business and professional clients with family legal concerns across western Pennsylvania.
Additional Resources:
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Top 10 Questions to Ask a Divorce Attorney
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