Introduction - Valuing the Business - For business owners separation and divorce present many substantial questions including: how will my business be valued?; will I be able to keep my business? ;my spouse is a shareholder in the business, will the company be able to redeem my spouse’s shares? This is the first in a series of articles that will address the issues that arise when a business owner is involved in a separation and/ or divorce, beginning with the most critical - establishing the value of the business.

The Most Important Steps - The two most important steps a separated or divorcing business owner must take to protect his or her business is to (1) hire a divorce lawyer who specializes in handling cases involving business valuation and complex financial transactions, and (2) retain a competent business valuation appraiser who has experience in litigation. In North Carolina, when a couple gets separated and divorced, the entire marital estate must be valued. If one or both of the spouses owns all or part of a business, that business must be valued as part of the marital estate. Typically, counsel for both spouses will each independently hire an expert to value the business, and more often than not, the resulting values of the opposing experts are vastly different, in some cases to the tune of millions of dollars apart. In order to obtain a value on the business that is accurate and will be accepted by the court, your divorce attorney must have significant experience in business valuation cases. An attorney with experience handing cases involving business valuation can identify business valuation experts that are competent and experienced and can easily spot those that should be avoided and are easy prey for annihilation on cross examination.

Pennywise and Pound Foolish - Competent divorce lawyers skilled in business valuation issues are not inexpensive. Neither are competent business appraisers. Hiring a CPA or economist who does not have the necessary business valuation training and experience may save you money on the front end, but his or her value may ultimately cost you thousands of dollars or more in the end because it will be shredded in cross-examination and rejected by the court. The old adage you get what you pay for applies in this context, and divorcing business owners must be careful not to compromise their entire case by hiring either inexperienced counsel or appraisers. Common missteps include hiring “experts” that:

* Lack appropriate credentials and experience to accurately appraise a business;
* Fail to adhere to ethical and professional standards that govern business valuation;
* Act as an advocate or “hired gun” ultimately compromising the appraiser’s opinion of value by showing bias and lack of independence;
* Have no experience defending their business valuation in cross examination;
* Produce reports filled with typographical, grammatical and mathematical errors.

All of these costly mistakes can be avoided by hiring a lawyer who is knowledgeable - about business valuation issues as well as an experienced and well trained business valuation expert.

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