ABA Connection: The Price is Right - Issues in Valuation

Valuation of assets is a crucial element in a variety of legal settings, including divorces, tax cases and business disputes. But valuation is not a simple process, especially for closely-held businesses, professional practices and intellectual property.  A recent CLE teleconference spoke to hot topics in the area of valuation such as business valuation in divorce, minority and marketability discounts, personal v. enterprise goodwill and how to value intellectual property. 

If one soon-to-be-former spouse is to buy the other out of a closely held, jointly owned business, should discounts be taken into consideration in assessing the value of the business? For example, should the business receive a marketability discount? And what about a minority discount? How does the determination of the extent of such discounts work?

A second valuation question in divorce cases has to do with separating personal goodwill from enterprise goodwill. Many believe that personal goodwill connected with an individual's business or in connection to professional reputation or knowledge is not marital or community property. Thus, it would not be subject to distribution considerations in divorce proceedings.

Even with such complications, business valuations can seem quite straight-forward compared with valuation of intellectual property. Patent infringement, unauthorized use of technology related to a patent, or simply patent ownership may be issues that arise with respect to legal valuation considerations. Businesses may want to consider adopting best practice guidelines on the management of intellectual property.

"The Price is Right: Issues In Valuation" will be available online, free to ABA members, for another two weeks.

The Connection TeleConference Series is offered each month, with an accompanying article in the month's ABA Journal. The May 2006 topic is " Strategies for Avoiding Conflicts of Interest." You can find the schedule online here.

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