Dear Carolyn,
Two years ago, I bought a business with two other partners. The business rocks along as it should, even with COVID. Now I think I am going to be going through a divorce. How will my one-third interest in the business be valued? I am not related to my two partners. This scenario scares me.
Carolyn Answers:
Business valuation can be tricky in equitable distribution (divorce property division). Usually, your attorney helps you find an expert with credentials in business valuation. Because you are not related to your partners, a new case deals with divorce business valuation when there is an arm’s length transaction in the shares of the business – Logue v. Logue. The Logue case holds that the court should consider the price at which the company sold if the sale was between unrelated parties. The Logue case is on appeal to the North Carolina Supreme Court.
Your business will be valued at your date of separation at fair market value. The purchase price for the business should be influential, according to the Logue case. You should hire a professional business valuator with a business valuation credential such as CVA, ABV or ASA. A CPA without a business valuation should be avoided.
Send your questions on family law and divorce matters to “Ask Carolyn…” at askcarolyn@rhinotimes.com, or P.O. Box 9023, Greensboro, NC 27427. Please do not put identifying information in your questions. Note that the answers in “Ask Carolyn” are intended to provide general legal information, and the answers are not specific legal advice for your situation. The column also uses hypothetical questions. A subtle fact in your unique case may determine the legal advice you need in your individual case. Also, please note that you are not creating an attorney-client relationship with Carolyn J. Woodruff by writing or having your question answered by “Ask Carolyn…”