In most states, where there is sufficient and credible evidence as to the value of a business, the trial court must assign a value to the business when making an equitable distribution award.  In the recent unpublished Virginia case of Hugh v. Hugh (Va. App. 2014), the trial court held it did not have sufficient and credible information to assign a value to the husband’s business and did not include a value in its equitable distribution award.  On appeal, the record shows that the evidence presented at trial by the parties regarding the husband’s company, E-Tech, came from husband’s testimony and that of an expert retained by the wife.  The Court stated that at best, the husband’s testimony regarding E-Tech was vague, indefinite, and confusing. Moreover, the information that he provided to the wife’s expert for his valuation of E-Tech was scant and indefinable.

The husband testified that the business was worth nothing and had no inventory.   The wife’s expert testified that he only had access to the 2010 tax return and 2010 financial statements, which greatly conflicted with each other.  He performed a valuation based on the information available and using a market approach concluded that E-Tech had an intrinsic value of $1.4 million.

On appeal, the Virginia Court of Appeals held that the trial court had a relative wealth of information regarding E-Tech from which it could have valued the business.  The trial court heard expert testimony, which valued E-Tech at $1.4 million, and husband’s testimony, in which he valued the business at zero dollars. Wife’s expert reviewed the company website, tax returns, financial statements, the deposition transcripts of husband and husband’s CPA, bank statements, invoice and purchase orders, depreciation and amortization schedules, and the corporate charter documents. Wife’s expert employed the market approach to value E-Tech, which he described as a “sound and reasonable method to value a closely-held business.”  Further, the trial court received into evidence E-Tech’s predecessor company’s 2010 and 2011 tax returns and E-Tech’s 2011 and 2012 tax returns.

The court stated that a business that has a gross income can be valued.  The case was remanded for a valuation of the business by the trial court.

Dwight A. Ensley

Dwight A. Ensley, JD, MBA, BBA, CVA
<center><a href="">Email Dwight Today!</a></center><!-- [et_pb_line_break_holder] -->

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!