Division Of Privately-Held And Family Businesses

There is a great deal of confusion that surrounds the division of a privately held or family business. Assuming that the business is not the separately owned property of one of the spouses, then the principles that address a division of a privately held or family business will vary depending on the facts of each case such as whether there are shareholders besides the parties; if there are third-party shareholders, is there a buy-sell agreement among the shareholders; and will the business continue as a family business following the divorce?

Call Riley Law Firm at 205-212-5577 to discuss your concerns about business valuation and equitable division of assets.

Ordinarily, parties that can no longer agree to stay married, will not be able to agree with respect to the future operation of a business. That situation generally leaves two alternatives: sell the business and equitably divide the proceeds; or value the business so that one party can continue to operate the business post-divorce and the other party can be compensated for her/his share of the business as a part of a property settlement and/or through spousal support.

Most parties are familiar with the concept of “fair market value”. However, Alabama has adopted the “fair value” approach for a business valuation when there is no ready market for the shares of a privately held or family business. Determining “fair value” requires the trial court to determine the proportionate value of the company as a going concern without applying any discounts for the value of a minority interest or the lack of marketability of the stock. Once the “fair value” of the business is determined, then the business interest is made a part of the Court’s “equitable division” of the marital estate.