Page 42 - Family Law Services

Chapter 6

Business Valuation

Role of the Practitioner

Business valuation assignments related to divorce proceedings have become a growing part of many
CPA practices. In many cases, because closely held businesses and professional practices are considered
to be marital or community assets, the value of these assets must be determined in order to facilitate an
ultimate property division between the divorcing parties.

Performing a business valuation in the context of a marital dissolution is different from other types of
business valuation assignments a practitioner may be given because the law in the jurisdiction of the di-
vorce must be considered. In addition to understanding the nuances of performing a basic business valu-
ation, the practitioner should become familiar with the local statutes and case law in order to avoid er-
rors in the valuation assignment. The processes and aspects of a business valuation that can be different
from other types of valuation assignments and should be taken into consideration are as follows:

• The discovery process

• The date of valuation

• The standard of value

• Valuation premises, approaches, and methods

• Compensation

• Goodwill

• Separate property issues and active or passive appreciation during the marriage

• Buy-sell agreements and covenants not to compete

• Valuation discounts and premiums

The Discovery Process

Obtaining information to perform a business valuation in a marital dissolution matter can sometimes be
difficult, particularly if the CPA is engaged by, or on behalf of, the nonowner spouse. If the CPA is en-
gaged on behalf of the owner spouse, it should be an easier task. But even in those situations, the CPA
must be cautious because the owner spouse may not be forthcoming and share all relevant data. If that is
the case, the CPA may need counsel’s assistance to convince the client that following that course is not
beneficial to any of the parties involved because it could potentially affect the credibility of the CPA.

The discovery process may be more difficult and costly if the CPA works for the nonowner spouse.
Once retained, the CPA should provide the attorney with a comprehensive document request list that the

40 © 2020 Association of International Certified Professional Accountants