The valuation of a business during a divorce

I was just reading an article Businessweek.com about how the bad economy is having an adverse impact on divorce filings. That is good news believe it or not.

But there are some people who are getting divorced and one of the issues that comes up during a divorce is that of valuing a business owned by one or both parties in the divorce action.

It is important to keep in mind that any asset earned, created, formed or acquired during a marriage is likely to be marital property. Certainly a business that was either formed during the marriage, or whose profitability increased during the marriage is marital property, and is a distributable asset according to the laws of Equitable Distribution here in New York.

One of the first things couples want to do is to get the business appraised by a forensics expert. A forensics expert with an accounting background and who is willing to provide testimony in court as to the value of the business.

According to the Businessweek article, one of the worse things to do is to lie about the value of the business. If the misrepresentation is discovered it could open up the business owner to sanctions by the court. Remember that during a divorce both parties have to provide a networth statement about their financial conditions. That statement is notarized and is under oath. If you lie on that statement, not only will the court restitute the wronged spouse, but you will also have to pay your spouse additional sums as a sanction.