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Small Business Valuations During the COVID-19 Crisis

the next few months may be financially devastating to many businesses, especially small ones. What happens if you are going through a divorce and the value of your business is an issue? What happens if you already are divorced and are paying your ex for their share of a business that was awarded to you? Is there any recourse?

If you are divorcing or planning a divorce, the virus could substantially reduce or even eliminate the value of your business. 

This is because a business value depends in large part on being able to predict with reasonable certainty how much you will earn in the future. The business valuation expert predicts this based on your past earnings. Past earnings may now be meaningless. That doesn’t mean you can’t settle your divorce if the two of you disagree over the value. 

One option would be to defer the issue to the Court to decide several months after the divorce decree has been entered in order to let the markets settle down a bit. 

Another option would be to divide a percentage of profits in the future after paying the business owner a reasonable wage for their service. However, these options require careful consideration and should not be attempted as DIY.

If you are already divorced and stuck with paying for a business that no longer has value, your options are far more limited. If you are in this position, don’t just give up. Consider getting at least a consultation with an attorney to determine if there is any recourse.

Stay tuned for more information about the effect of this virus on vital family law issues.

This post is intended to highlight just certain portions of the Arizona Rules of Family Law Procedure. It is not intended to substitute for professional legal advice on your specific case. McCarthy Family Law is a family law firm; however please check with your personal family law attorney for advice specific to your case. Or you can contact our office to speak to one of our family law attorneys to discuss how these rules may impact your specific case.

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