Should My Spouse's Business Have A Forensic Evaluation

Is it a business, a job or a hobby?  Those of us that have seen Shark Tank have heard people dismissed from the tank for having a "hobby" and not a "business".  The same is true in divorce law.

The first real question is does the person make more money owning and operating the business than they would if they were an employee?  The second and third questions are how much more money and is there a market for that type of business?

If a self-employed spouse is a plumber and earns after all operating expenses close to what would be earned as an employee then the "business" may have no value for divorce purposes.  The reason is that in real life nobody would pay to buy the business to earn the same money they can earn working as an employee with none of the headaches and responsibilities of ownership.  The employee does not have to generate accounts, does not have to pay insurance, rent, vendors and collect from customers.  Unless there is a financial reward for the extra work and risk, why pay to earn the same thing.

If the business, while successful, is in a dying industry, then again there may be no market for it.  Just think of all the products and services that we used 10-15 years ago that you can't find in the store or anybody who wants to do that type of work.  Corporate America is taking over and many small businesses are being swallowed up without even being purchased by the larger companies.

Sometimes, the best thing to do is to speak to the forensic before you pay the retainer and provide some basic background information, if you have doubts, the forensic will tell you whether to spend the money for the evaluation.  Remember just because there are numbers and earnings is not a guarantee that there is a business to be valued.  Furthermore, in NY the courts tend to give between 20 to 30 percent of the appraised value as it is speculative whether the earnings will continue at the same rate.  If the spouse is an active partner in the business and has made real contributions to the business the percentage will be higher.

Hiring an experienced matrimonial attorney can help save you money beyond the mere calculation of child support and spousal support.