How a Business Valuation Can Make or Break Your Divorce Settlement
When a marriage ends, dividing property fairly can be complicated—especially when a closely held business is part of the marital estate. Unlike bank accounts or publicly traded stocks that have clear market values, businesses owned by one or both spouses often require careful appraisal to determine their worth in a divorce. This valuation is critical because it directly affects how much one spouse may receive in the property division.
In Oklahoma, courts require that all marital assets be valued before division, but the process is more complex for closely held businesses. The value of the business influences not only the financial settlement but also future economic stability for both parties. Understanding the valuation process can help you avoid surprises and prepare for negotiations or trial.
Determining the Right Date and Method for Valuation Matters
One of the first challenges in valuing a business in divorce is deciding the date for the valuation. The value of a business can change significantly over time. If the parties cannot agree on a specific valuation date, the court will select one that is fair and appropriate for each asset, including the business. Okla Stat. tit. 43 § 110. For example, if one spouse improved the business after separation, the court may value the business as of the separation date to avoid crediting the other spouse for post-separation efforts.
The method of valuation also varies. Some assets, like bank accounts, have straightforward values. But valuing a closely held business requires looking at factors such as earnings, assets, market conditions, and potential tax consequences. This often involves hiring financial experts to appraise the business properly. Additionally, if the business includes minority interests or lacks a ready market, special discounts may apply to reflect these complexities, as recognized in Oklahoma case law. King v. Southwestern Cotton Oil Co., 1978 OK CIV APP 19.
If you own a business, consulting with an Oklahoma attorney experienced in family law can help you understand how these valuation rules may impact your case.
Why “Goodwill” and Non-Compete Agreements Don’t Protect Business Value in Divorce
Some spouses believe that courts will enforce agreements to prevent the other from competing with a business awarded in the divorce, hoping this will preserve the business’s value. However, Oklahoma courts have rejected such covenants not to compete in dissolution cases as against public policy. Favel v. Favel, 1998 OK CIV APP 22. This means one spouse cannot ask the court to stop the other from starting a competing business after divorce.
That said, if a spouse starts a competing business during the divorce proceedings and harms the value of the jointly owned business, this may affect its valuation and the monetary interests of both parties. Colclasure v. Colclasure, 2012 OK 97. The court looks at how each party’s actions during the pendency of the case influence the business value, making professional legal advice crucial to protect your interests.
Engaging a knowledgeable divorce attorney can guide you through these complicated issues and help you build a strong case.
How Post-Separation Actions Impact Business Valuation
The value of a business can be affected by what happens after spouses separate but before the divorce is finalized. If one spouse enhances the business through their efforts or investments after separation, the court may choose to value the business as of the separation date, so the other spouse is not unfairly credited. Okla Stat. tit. 43 § 110. On the other hand, if one spouse damages or depletes the business assets during this time, they may bear the loss entirely, and the valuation will reflect that.
This highlights the importance of the automatic temporary injunction that goes into effect when a divorce petition is filed, which prevents dissipation of marital assets during the case. Violating this injunction can have serious consequences on the valuation and division of property.
Understanding these nuances can be daunting, so it’s wise to work with professionals who understand Oklahoma family law and business valuations.
Contact an Oklahoma attorney Today
Valuing a closely held business during divorce is a complex and sensitive process with significant financial consequences. If you’re facing these challenges, Wirth Law Office can provide clear guidance on how Oklahoma law applies to your situation. While no outcome can be guaranteed, having a skilled legal team by your side can help you navigate the valuation process, protect your interests, and work toward a fair resolution. If you need legal help, call Wirth Law Office at (918) 879-1681 for support and advice.
