Valuation Practice

Walters Gilbreath, PLLC

Determining the value of a professional practice – especially in court – can be difficult. If you aren’t sure where to begin in proving the value of your professional practice for your divorce, this article can help you do so. Here, I will discuss how to value a professional practice as opposed to a non-professional business. Then, I will explain the role of discovery and valuation experts in your divorce. Finally, I will discuss presenting documentary evidence at trial.

1. Valuing Your Practice

There are a few important things to keep in mind when differentiating valuation for your professional practice from an operating non-professional one. Consider the following points:
Professional practices usually constitute service businesses. This means that they do not produce or sell tangible products. So, this means that professional practices depend largely on intangibles.

Patients or clients of the business rely on the professional involved in the business. So, establishing a distinction between commercial and personal goodwill is important in determining the value of the business.

It is important to keep in mind that professional practices offer a variety of services.

2. The Discovery Process And Valuation Experts

Determining the value of your business often happens through a trial by experts. You should know that there are over 25 common valuation techniques, but these methods should not be mixed. To make sure that you hire the proper experts to help you with your case, make sure that they have the following credentials.

A. Accredited In Business Valuation (ABV)

A person obtains this through the American Institute of Certified Public Accountants. First, a person has to qualify to take the exam by establishing their knowledge in the area of business valuation. Then, they have to take and pass an eight-hour exam. To maintain this credential, the person must complete 60 hours of continued education every three years. Also, recertification happens every three years. Also, the holder of this credential has to remain a good standing member of the AICPA.

B. Accredited Senior Appraiser (ASA)

This credential is issued by the American Society of Appraisers. So, to be certified as an ASA, a person has to:
Pass an eight-hour exam.

Submit two written business valuation reports.Then, to maintain this credential, the appraiser must complete 40 hours of continued education every five years.

C. Certified Business Appraiser (CBA)

A person obtains this credential through the Institute of Business Appraisers. They become certified by taking and passing a four-hour exam. Also, they have to submit two written business valuation reports. Also, consider that no requirements are necessary to maintain the certification.

D. Certified Valuation Analyst (CVA)

The certification is issued by the National Association of Certified Valuation Analysts. A candidate must:

  • Be a member of the AICPA in good standing.
  • Be a CPA.
  • Complete 40 hours of training.
  • Complete and pass a four-hour exam.
  • Submit a written business valuation report.
  • Complete 36 hours of continued education every three years.

3. Documentary Evidence At Trial

Documents can be presented at trial to help determine valuation. Which documents are used will depend on many different factors. For example, you need to consider who is being represented at trial – the business owner or their spouse. You should also consider the desired outcome of litigation. Make sure that you discuss this with your attorney before getting to trial.

Using documents as evidence should always be done consciously and carefully. Always consider what the opposing party will say about the documents once they can be used in court. You might think that a document will help to prove your case, but upon cross-examination, the other party might use this evidence against you. So, always consider all possible outcomes of using documentary evidence at trial.

There are many different types of documentary evidence that might help with your situation. This include:

  • Original purchase documents.
  • Corporate minutes.
  • Corporate balance sheets.
  • Profit and loss statements.
  • Sales forecasts.
  • Representation of values to third parties.
  • Tax returns.
  • Buy-sell agreements.
  • Stock transfer ledgers.
  • Partnership agreements.
  • Previous litigation.
  • Financial statements.
  • Loan applications.
  • Personal property tax rendition records.
  • Insurance policies.
  • Business interruption.
  • Underwriters’ reports.
  • Market studies.
  • Equipment leases.
  • Real estate leases.
  • Real estate tax records.
  • Trade association literature.
  • Offers to sell or buy.
  • Record replacement insurance.

Turn to Walters Gilbreath, PLLC

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