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FAMILY LAW... & MORE

Valuing a professional practice during a divorce

On Behalf of | Jul 27, 2021 | Blog, Divorce, Property Division |

Professionals in New Jersey should understand that their practice may be viewed as a marital asset during any divorce proceeding. That means that, like the house, retirement accounts and checking account, it will potentially be divided with a portion of the value given to each spouse. Valuing a professional practice can be complicated. Understanding who does the valuation and what they look at can help you prepare.

The who and how

During a divorce, valuations for the purposes of property division are done by a neutral third party. This means the person must not have a conflict of interest that makes them favor one spouse over the other. If the valuation is done by someone with a designation such as CPA, their professional code of ethics will hold them to a standard of neutrality.

Arriving at a figure

The way the value of a practice is arrived at can vary from state to state. There are several different methods that can be used. In some places, it’s specified that the valuation should be based on the intrinsic value of the business. This means looking at the business much as an investor would. Other ways of arriving at the final figure include considering market value. Valuations are conducted on a date selected by the court.

It’s important to share any questions you have about the valuation process with your attorney. They may be able to shed some light on the nuts and bolts of the process. Remember, your lawyer has been through a number of divorces with other clients. Through their experience, they may have gained some insights into the way most valuation experts and judges approach the division of property.