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The Divorce Encyclopedia
Closely Held Corporation

Term Definition Closely Held Corporation - a corporate entity with privately owned stock, as opposed to one traded publicly on an exchange.
Application in Divorce Same as a private company.

In divorce, these entities must be appraised by various experts who use different methods to place a value on the corporation for purposes of marital distribution. Many factors -- including fair market value versus fair value, goodwill, salaries versus distribution of profits, return on capital -- make this calculation difficult and subject to dispute in divorce actions.

The problem of appraisal is made more complicated because one spouse (usually the husband) may be far more emotionally attached to the business than the other, and he may be far more threatened by the appraisal and the cost of holding on. In some cases, part of the value of the business may be separate property and the remainder marital property, as in the case where one spouse had an established business when he or she married.

One veteran divorce lawyer says of the complexities of these valuations, "You cannot approach this issue yourself."

See Fair Market Value, Fair Value, Good Will.

See also Marketability Discount and Minority Discount.

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