Business Valuations in Divorce —
Protecting Your Business and Your Future

It depends on when and how the business was established. If the business was founded during the marriage, it is generally community property — subject to equal division. If you owned the business before marriage, the pre-marital portion may be your separate property — but any increase in value during the marriage may be community property, depending on whether the growth was due to your labor and effort or passive market appreciation. Determining the community and separate property components of a business requires careful legal and financial analysis. At Haslam Perri Law Firm, our attorneys work with expert business valuators to ensure this analysis is accurate and complete.

A business valuation is a professional financial analysis that determines the fair market value of a business as of the date of separation. In a California divorce, the valuation establishes the value of the community property interest in the business — which then forms the basis for negotiating a fair settlement. Without an accurate valuation, you may significantly overpay or receive far less than your fair share. Our attorneys engage certified business valuators who use accepted methodologies to produce defensible valuations that hold up in court.

Business valuators use several accepted methodologies depending on the type and nature of the business. The income approach values the business based on its earning capacity and projected future income. The market approach compares the business to similar companies that have been sold. The asset approach values the business based on the fair market value of its assets minus liabilities. For professional practices — such as medical, dental, or legal practices — valuators also consider goodwill, which can be characterized as personal or enterprise goodwill with significant tax and division implications.

If you cannot immediately pay your spouse’s share of the business value, several alternatives exist. You may offset the business value against other marital assets — giving your spouse a larger share of the home, retirement accounts, or other assets in exchange for keeping the business intact. You may also negotiate structured installment payments over time. In some cases, both spouses continue as business co-owners post-divorce — though this requires careful legal agreements. Our attorneys help you find the arrangement that keeps your business viable while ensuring a fair overall settlement.

Professional practices such as medical, dental, law, and accounting firms present unique valuation challenges — particularly regarding goodwill. California distinguishes between enterprise goodwill (the value of the practice as a going concern, which is community property) and personal goodwill (the value attributable to the individual practitioner’s reputation and relationships, which is typically separate property). Properly characterizing goodwill is critical — and can significantly affect the value subject to division. Our attorneys engage experienced forensic accountants and professional practice valuators to ensure accurate analysis.

Yes. Even if the business itself is determined to be your separate property, the income you earn from that business during the marriage is community property — and affects both property division and spousal support calculations. Additionally, your capacity to earn income from the business is a key factor in determining spousal support amounts. Our attorneys ensure that business income is accurately presented — neither overstated nor understated — to reach a fair support determination.