Every divorce involving a closely held business contains a second case: the fight over what the business is worth. The number produced in that fight often exceeds the value of every other asset combined, and it is determined by expert testimony, not by a formula.
The Business Is Property — or Part of It Is
If a business was founded or acquired during the marriage, it is marital property. If it predates the marriage, the value at the date of marriage is separate and the increase in value during the marriage is marital — the same appreciation rule that governs every other separate asset in Colorado. Either way, the court must arrive at a value before it can divide anything.
Goodwill Counts
Colorado has long recognized that the value of a business is not limited to its hard assets. Goodwill — the value attributable to reputation, relationships, and the expectation of continued patronage — can be part of the marital estate, including in professional practices. The contested question is usually how much of that value belongs to the enterprise and how much is really the owner personally: skills, reputation, and relationships that would leave with the owner. Experts on both sides will draw that line differently, and the difference is frequently the largest single variable in the valuation.
Your Buy-Sell Agreement Is Not the Final Word
Business owners often assume the formula price in their operating agreement or shareholder agreement settles the question. It does not. Colorado courts treat a buy-sell formula as evidence of value, not as a ceiling the court must respect. A formula designed for a partner's departure — often deliberately conservative — is unlikely to reflect fair market value for a spouse who did not sign it. Expect the other side's expert to say so.
Timing Matters
Colorado values marital property as of the date of the decree, or as of the date of the hearing on property division if that hearing comes first. A business that grows during a long, contested divorce grows the marital estate with it. The reverse is also true: a downturn during the case reduces what is divided. That timing rule shapes litigation strategy in ways owners rarely anticipate, and it is a reason to think carefully about the pace of the case.
What the Experts Actually Do
A credible valuation typically considers three approaches — income, market, and asset — and explains why one or more controls. Along the way the expert normalizes the owner's compensation, adjusts for personal expenses run through the business, and applies discounts for lack of marketability or control where appropriate. Each of those judgment calls moves the number. The difference between a rigorous valuation and a lazy one is routinely six or seven figures, which is why the selection of the expert is one of the most consequential decisions in the case.
The Double-Counting Problem
A recurring issue for business owners is the interaction between the valuation and support. If the business is valued on its income stream and awarded to the owner as property, and that same income is then used to set maintenance and child support, the owner may feel — with some justification — that the same dollars are being counted twice. Colorado courts are attentive to the issue, but the analysis is fact-specific and the outcome depends heavily on how the case is presented.
Practical Steps for Owners
- Assemble clean financials early: tax returns, general ledgers, and any prior valuations or offers
- Identify personal expenses paid by the business before the other side does
- Preserve records of value at the date of marriage if the business predates it
- Retain a valuation expert with real testimony experience, not just a credential
- Consider whether a negotiated buyout structure serves you better than a litigated number
Talk to a Denver Divorce Attorney Who Handles Complex Estates
Aaron Herzberg is a divorce attorney in Greenwood Village, Colorado, serving Denver and the Front Range, with more than 30 years of trial experience and a practice focused on high-net-worth and financially complex divorce. If a business sits at the center of your divorce, the valuation strategy deserves attention from the first week, not the last.
Request a Consultation or call 303-507-5529
This publication is attorney advertising. It is educational information only, it is not legal advice, and it may not reflect the most current legal developments. Reading it does not create an attorney-client relationship. No attorney-client relationship exists until a conflicts check is complete and both parties have signed a written engagement agreement.
Read the full guide on DenverDivorce.com: Business Valuation in a Colorado Divorce.
