Business valuation: Businesses started during marriage, do not have to end during divorce.
Missouri's laws involving property division during divorce are not complicated, but they can be very difficult to apply in real life situations.
Outside of a few exceptions, property obtained during a marriage needs to be divided during a divorce, businesses included.
Obviously, this can be a highly contested issue especially where one spouse feels they built the business without the support of the other spouse. Often a person's business is very personal to them, but that isn't necessarily considered by a divorce judge, and if the business is marital property, the value of it will need to be divided between the parties.
There is reason behind this though, when one spouse primarily contributes to the building of a business, they increase the value of that business. Doing so during a marriage, one could reasonably assume a spouse's intent to increase the value of a business for the benefit of the marital estate. Courts often bring that principal into consideration during a divorce, especially when it could be financially detrimental to the party who earns less income.
If a business is marital property, which again is not necessarily determined by the level of contribution one spouse provides to the business, then a value needs to be assigned to the business, and divided. First step, assigning a value.
All marital property to be divided during a divorce must have a value assigned to them by the court. Most courts will do everything they can to form as accurate of a value to marital property as possible. In one divorce involving over 40,000 rounds of ammunition in the marital estate, the judge ordered us to find someone to count and value every last bullet. We did, it was rough.
One can imagine how valuing a business, especially a new or unique one, would provide some complications. Often the parties will need to hire business valuation experts to apply various valuation methods, whether it be income, cash flow, or market, the court will attempt to determine how much a business would be worth to a willing buyer. In doing so, potential risks to the business, will need to be considered, i.e. client concentration, key employees, patent issues, etc.
Unfortunately, some experts may attempt to provide valuations that are more focused on providing an advantage for the party that hired them rather than focusing on providing an accurate value of the business in question. This is where the divorce attorney comes in, and hopefully they are familiar with these valuation methods to determine where an expert may have taken some subjective liberties in their calculation.
When all is said and done, it may simply come down to which expert the judge believes more. Which can be a very frightening thought depending on which side you fall.