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Divorce involving a closely held business can be complicated

Divorcing couples in Pennsylvania are called on to perform the arduous task of valuing and dividing marital assets. Appraisals must often be performed, value statements for retirement accounts must be obtained, tax records must be reviewed ,and blue book values must be consulted for vehicles.

A small business is often more complicated when one of the parties owns a private company. Unlike public corporations where a share value can be obtained on an exchange for any given day, private companies require independent valuation.

In many cases, parties use an appraiser to place a figure on the net worth of the company. To do so, the appraiser must have full access to financial records. This would include balance sheets and income statements, tax records, recent sales statistics, inventory records and other materials. A meeting with the appraiser before discovery requests are made is often advisable.

There are a number of ways in which the company can be valued. The asset approach focuses on the balance sheet, the assets and liabilities of the company. The income approach focuses on profit and loss, both in past years and a projection into the future. The market analysis focuses on the price of other similarly situated companies have sold for in recent history.

There are cases where the business-owning party may attempt to hide assets or inflate liabilities. The other party should scrutinize records for inconsistencies and be ready to conduct follow up investigations as needed. Failure to adequately explain a loss of assets could be brought to the court's attention during the hearing.

For a divorce with a private business among the marital assets, a family law attorney with experience in valuing small businesses may help make a difference in the case. The valuations, the strategy, the discovery process and negotiations all differ greatly from a typical divorce matter.

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