Is My Spouse’s Business Included in a Divorce?

In many Divorce or Legal Separation cases, one or both of the spouses have business ownership interests. These business ownership interests are required to be disclosed during the legal process of either a divorce or legal separation, in Colorado. Colorado Rules of Civil Procedure explains the duties that both parties have in making sure that the other party has been provided with, “full and honest disclosures of all facts that materially affect their rights and interests and those of the children involved in the case.” If a party in a divorce fails to make the necessary disclosures, this may result in the court imposing sanctions or penalties for the failure to make such disclosures.

A Business interest that has been created during the marriage or which a party has relied upon as income for the support of the family, in either whole or part, is required to be disclosed in any “domestic relations” case, such as a divorce. It is important to provide your attorney with proof of the existence of any such business, such as with copies of articles of incorporation with the Colorado Secretary of State, partnership agreements, business tax returns, issuance of stocks, etc. In many situations, businesses have had tax specialists who have access to this kind of information.

Assuming that one of the spouses has one or more business interests, the next step after the disclosure of the business, is to determine the “value” of the business. There are experts in domestic relations cases and divorce cases, who specialize in valuing a company, business or partnership. Attorneys, who represent clients in divorce cases, should be familiar with the best experts who can conduct a “valuation.” Many valuation experts are also Certified Public Accountants, who have a great deal of training in this area of the law and understand the expectations and rules that apply to experts.

Experts who conduct business valuations have specialized skills and when they are involved in legal proceedings, such as divorce cases, they are called, “Forensic Experts.” This means that they have a background, experience and training in this area of the law and have testified in court and given opinions regarding the value of a business or business interests.

The rules of civil procedure describe the manner in which experts are to be disclosed and how their valuations are to be provided to the other party or other attorney. There are rules regarding expert’s reports and valuation opinions and the timelines in which such reports must be made, prior to the court hearing. Because of the time limitations that are described in the rules of procedure, it is important to have the process begin as early in the case as possible. When a lawyer representing a party in a divorce has information that the marital estate’s financial status will be impacted by the valuation of a marital business, the name of any expert witness and the expert’s resume, must be timely disclosed.

Because of the impact that a valuation of a marital business may have on a divorce proceeding, this type of information is needed well in advance of attending mediation or a court proceeding. The lawyer representing you, will want to  meet with you and the expert on one or more occasions before any reports are issued regarding the valuation  issue, so that proper preparation is done well in advance of mediation or a court hearing.

Experts who testify regarding a business or company valuation, whether that business is considered a, “Mom and Pop” business or a larger company with many partners and employees, is a specialized skill. By having all documents needed for the expert along with a historical analysis of the business operation practices and finances will be needed in the divorce. By working closely with the valuation expert, a client can receive both legal advice from an attorney and financial advice from the expert, which will prove to be essential to any kind of pre-trial settlement, as well as with respect to the facts that will be presented if a court hearing is needed.

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