It’s never required that the parties engage in a business valuator, the parties agree to valuations. Unfortunately those agreements are not as forthcoming or as frequent and forthcoming as we might like. There are ways of looking at business value without hiring and obtaining the opinion of a business valuator.
Give you an example of a California approach that has been adopted by case law in Nevada, the courts have looked at the common components of many, many businesses being fixed assets, accounts receivable and goodwill. And fixed assets are fairly self explanatory, accounts receivable is what the business owner is owed, properly discounted for how long that debt has been owed. And then there’s good will and good will is often times cynically referred to as “blue sky,” but it is a measure of the momentum of the business value in place and its recognition and visibility in the community.
Both states have adopted a measure that you can in court, a trial judge is empowered in his or her discretion to use 25% of a year’s average gross receipts as a measure of good will. So in an instance where the spouses could agree upon that, they certainly wouldn’t need to hire a business valuator. Now the question of the cost effectiveness of a business valuator is really directly related to two things, the level of disagreement or contentiousness between the parties, and two, of course the value of the businesses.
Business valuation can be an expensive process, but that’s relatively speaking. If you have a business that may be worth a million dollars, spending 30 or $40,000 on a business valuation is money well spent. If you have a business that’s worth 30 or $40,000, that same expense makes no sense. So, I would agree that the value of the business has to be looked at to either justify or discourage the engagement of the business valuator, but the parties certainly have the option of agreement and that oftentimes, if the parties are informed, if the parties are well aware of their respective activities, that’s oftentimes the most preferable way to go.
Leslie Shaw practices family law in both California and Nevada, and has been involved in close to 1,000 family law matters largely involving litigation throughout his 40 year career. He is also a Certified Family Law Attorney, a status granted by the California Board of Legal Specialization. To learn more about Leslie and his practice, please visit www.ljslawoffice.com.