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Dividing a family-owned business in a Virginia divorce

On Behalf of | Apr 6, 2020 | Family Law

When a well-off couple in Northern Virginia decides to end their marriage, one of the most contentious issues may be the valuation of any family owned business. Courts usually encourage divorcing couples to negotiate a compromise resolution of their disputes, but such compromises are not always possible. Anyone beginning the divorce process may find the following summary a useful guide.

The first point is to understand that Virginia is an equitable division state, that is, the court is free to divide marital property in any manner that it considers fair and equitable. Marital property is defined as all property acquired after the date of marriage other than property that was separately owned by either spouse prior to the marriage. In dividing these assets, the court can consider the effort that each spouse put into increasing the value of marital assets. The court may also consider the fact that one spouse contributed more value such as cash or hard assets to the business’ success.

Family-owned businesses are often considered to be part separate and part marital property. Valuing such assets can be very complicated. Both parties are allowed to offer evidence about the value of the property. This evidence may take the form of one or more expert appraisals, valuation testimony from CPAs and similar experts. Each of the spouses is allowed to testify about value, but this testimony often lacks credibility. If one spouse owned the business before the marriage became official but the other spouse contributed significantly to its value, these efforts are often considered marital property and are divided separately from the rest of the business.

Anyone facing a divorce in which dividing a family-owned business is likely to be an issue may wish to contact an experienced divorce attorney for advice on valuation. A knowledgeable attorney can often provide helpful advice on different valuation methods and whether to hire experts such as appraisers and accountants.