Small businesses and professional practices are probably the most difficult assets to value for purposes of property division in an Orange County or Los Angeles County divorce and they routinely require expert testimony. The market value of a going concern is determined by valuing several components: accounts receivable, goodwill, fixed assets and liabilities.
1. Accounts Receivable: Accounts receivable are a major asset of most small business and professional practices. But in valuing a business or practice, this asset is rarely included at face value. Rather, a reduction for bad debts is appropriate in valuing the small business altogether.
Also the percentage of uncollectable receivables varies from one business or practice to another. Because of this, expert witness testimony on bad debts may be required to establish the percentage write-off appropriate for the business or practice at issue.
2. Goodwill: Goodwill is common and difficult to value in the community property division of a small business and professional practice. “Goodwill” means that there is an expectation of continued public patronage. There is no set rule for determining the existence or value of goodwill has been established. Rather, each case must be determined on its own facts.
Contact an Orange County divorce lawyer for help in valuing your small business or professional practice at divorce.