Should I Get a Business Valuation Done BEFORE I File for Divorce?

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My name is Melissa Gragg and I am a divorce valuation expert. What does that even mean? Well, I work with business owners and entrepreneurs in every stage of the divorce process, whether in mediation, collaborative divorce or litigation. There are many questions and dmyths about what happens in a divorce when you own a business.

Here is one of the top valuation issues every business owner should know before you file for divorce.

1.      Should I get a business valuation done before I file for divorce?

Most people will want to do some pre-divorce planning or at a minimum know what the business is worth before they even decide whether to get divorced. Typically the business owner will reach out to a valuation expert and say “I want to try to get a valuation number because I'm doing some strategic planning” or “I just want to know what the business is worth for internal purposes”. Typically, the owner will not tell the valuation person the whole story or that they are considering getting divorced. This could lead to a serious issue in the future divorce process if you get a valuation in writing, as of a certain date, for any purpose. This report and any emails you exchange with this valuation expert could now be discoverable. What that means is that any email or conversation you have with this person could be shared with everyone in the divorce process even if the valuation took place prior to the divorce.

Now what this business owner could have done differently is when they originally got the first valuation, they should have just been clear about the reasons for the valuation and that it was primarily for a potential divorce. And if they had worked with an expert who routinely did valuations for divorce then that expert would have told them that they should not put anything in writing but that they should discuss the value. This would also have allowed the business owner to use the same valuation expert for the divorce which means all the work that they put in to try to determine what the value was prior to divorce would still be relevant and useful in determining the value at the date of divorce.

One of the things that you must keep in mind is that when we serve as an expert witness in a litigation – we are not covered by the same privilege as your attorney. An expert is there to help the judge understand the financial situation of the company and the couple. I am there to serve the court, not to be biased towards one side or the other. So, when you have a conversation with an expert witness it is NOT privileged which means the expert can be pulled into court to discuss what you have told them. The expert may also have to produce all the emails you have sent them. So, when you send an email that says, make the business worth nothing and I don’t want to give my husband or wife a dime…that doesn’t usually go over well with the judge.

A business valuation expert is bound by confidentiality which means they won't discuss the nature of your business or your financials with other people outside of the divorce, but it also means that when they are subpoenaed for trial or for even a deposition the other attorney could ask for all of the emails, all of the interactions, all of the notes and anything that was developed and provided by the business owner under any context during the valuation engagement. The divorce lawyer could ask for any offers to buy your business, or any valuations you have had over the past five years. The attorney could ask for information in the valuation expert’s files, even emails prior to the date that you filed for divorce. So, this means you need to work with somebody that knows how to value your business but also knows how to testify in court. This will allow you to understand the value of your business prior to filing for divorce but also not to have any documentation of that number or any prior valuations that could be discoverable during your divorce. Basically, this also means you need to be very honest with the valuation expert about the reasons why you want to go through this valuation process and to work with somebody who understands the nuances of divorce court.

So, I am considering filing for divorce, but want to be prepared - What should I do next?

Give us a call! No really, you should reach out to someone who specializes in valuations for the purpose of divorce. There may be many valuation companies near you, but do they understand the divorce court system in your state? That would be a good first question to ask. Then see how many times they have testified. Are they trained as a mediator? Do they understand how to negotiate settlements with other experts?

If you have any additional questions or would like to talk about your specific situation, please give us a call or text us at (314) 541-8163 or check out our website at https://www.ValuationStLouis.com/

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