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Orange County Divorce Blog

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Closely Held Business Valuations

In re Marriage of Hewiston discussed the valuation of a closely held business.

The parties to this divorce owned a business together. Each party’s expert used the price-earnings ratio of publicly traded companies to determine the market value of the closely-held company. After the case was submitted, the Lotz decision was entered which held that the price-earnings ratio should not be the sole basis to value a closely held business.

Nevertheless, the family law judge relied on the wife’s expert who only used the price-earnings ratio of publicly traded companies to determine the value of the family business. The husband appealed, because the wife’s expert’s opinion was based on corporate acquisitions of comparable companies rather than stock prices of comparable companies, listed on a stock exchange or over-the-counter.

The appellate court agreed with the husband. It held that the value of a closely held corporation should not be based solely on the basis of the price-earnings ratio of publicly traded corporations, because it is almost impossible to find comparable companies. The appellate court also reasoned that closely held corporations are inherently different from publicly held corporations, because of their lack of marketability.

If you need legal advice and are looking for a family law lawyer in Orange County to address a dissolution issue such as business division or any other divorce matter such as legal separation, annulment, custody, child support, spousal support and/or property division, please consider Treviño Law in your divorce attorney search. Trevino Law is located in Laguna Hills right off Lake Forest exit to both the 405 and 5 freeway.

Although the posting of this information can be considered free legal advice for a divorce in Orange County, it does not address other factors which may play a significant role in a particular dissolution. Circumstances in your divorce may alter the results in your dissolution.

Please note that this legal advice does not establish a family law attorney-client relationship. This is a legal advertisement for Treviño Law, Inc.