Business Valuation and Business Goodwill

Question 1

Business Developed During Marriage

Answer 1

When a business is developed entirely during a marriage, it is entirely community property.

Question 2

When Van Camp and Pereira Apply

Answer 2

Those rules apply when community property enhances the value of separate property—when a spouse owns, or invests in, a separate property business or investment before marriage, and the value of the business increases during marriage.

Question 3

When Pereira Applies

Answer 3

When the management efforts of the spouse are the primary cause of the growth of the value of the business or separate property asset, use the Pereira rules.

Question 4

Pereira Rule

Answer 4

(Initial capital value + [IC x ROI x years married}) = SP

Value of business at divorce - SP = CP

Question 5

When Van Camp Applies

Answer 5

When the character of the business or separate property asset is primarily responsible for its growth, apply the Van Camp rules.

Question 6

Van Camp Rule

Answer 6

([Market salary - Family expenses] x years married) = CP

Value - CP = P

Question 7

Business Goodwill

Answer 7

Business goodwill - the difference between a business’ total value and the value of its assembled physical assets - is treated as community property to the extent it is earned or developed during marriage.