As we discussed in last week’s blog, you may discover that a business valuation is needed for your Utah divorce. If that is the case, you are probably wondering: ‘but how do I properly conduct a business valuation under Utah law?’ Answer: Talk to a lawyer. Businesses are different. The person you choose to value one business will not be the person you choose to value another business. You’ll want to find an individual who is qualified to give an opinion as to the value of your particular business. Is it an asphalt business? Is it a dental practice? Is your spouse a physician? Do you own a marketing company? Are you a self-employed placenta encapsulator? Do you or your spouse own a car dealership? What is the business and who is an expert in the purchase and sale of that particular business?
Regardless of the individual selected to perform the business valuation, he or she will want all documents related to the business. QuickBooks records, records of all accounts receivable, assets, debts, all bank statements, any equipment lists, and federal and state tax returns for several years. Gather all these documents and be prepared to give them to the professional you choose to give his or her opinion as to the value of your or your spouses’ business.
A business valuation conducted by a qualified person can be valuable so you and your spouse can get an objective idea of the value of your business. This should be performed long before trial and ideally before a mediation. Utah trial and appellate courts have considered a variety of approaches to valuing a business including a fair market value approach: How much would the business sell for if we sold it today? A business might appear to be worth $100,000 in tangible assets, accounts receivable, and “goodwill.” But if this particular type of business usually sells for only 90 percent of its value, then a business evaluator and a court may find its value to be $90,000 under the fair market approach. (See Sorensen v. Sorensen, 769 P.2d 820, 832 (Utah Ct. App. 1989).) Also, if an owner of a sole proprietorship isn’t willing to sign a non-compete, then the fair market value of that business may be substantially reduced.
For a more in-depth look at case law concerning business valuations in Utah, check out this document prepared by our office.