As court-appointed experts, we have recently testified on some basic California Family Law principles:
Value at Date of Trial vs. Date of Separation
An “old” issue, in the instant case the company provided environmental clean-up services and employed a workforce of about 40. Just because the company provides services does not mean that the business should be valued at the date of separation. The subject company also had a significant investment in capital equipment. While husband/operator-manager was certainly important to successful operations, he did not (obviously) do all the work. We testified that the proper date of valuation was a date “nearest trial” and the court agreed.
“New” Business Started Post Separation / Community or Separate ?
As in many other cases, husband/operator-manager started a “new” business within 60 days or formal separation. In the same line of business as the “original” business and with accounting and support provided by the original administrative office, formal inter-company accountings were not maintained nor were corporate formalities.
Just as important, the capital to start the business (both debt and equity) was sourced at the “original” business. Stock certificates were issued in the “wrong” name. Husband did not take the important step of asking and then confirming with wife that the capital used to start the “new” business was an allowed and approved the preliminary distribution of the community estate to be considered separate property. The court confirmed our view that the “new” business was really the “old” business and community property.
Valuations play a part in transactions, taxation, and litigation. For additional information or advice on a current situation, please do not hesitate to call.