Divorce Dex.com: Marketability Discount

Definition Marketability Discount - a term used to reflect the lack of liquidity in a party’s interest in a private business.

Application in Divorce The term is sometimes used reflect the fact that a party’s interest in a private business carries with it no liquidity.

Cash is the most liquid form of wealth. An interest in a business may have a value expressed in dollars, but that interest is not the same as having the money in the bank.

As it applies to divorce, the calculation of a marketability discount may affect the fair value and fair market value of the enterprise, and it is sometimes a consideration in the appraisal of a private business.

See also Buy and Sell Agreement; Closely Held Corporation; Marketability Discount; Fair Value; Fair Market Value.

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Family Business and Divorce
In a divorce, a family business can be most problematic. Many family businesses can simultaneously be separate property (when, for example, one spouse started it before the marriage) and marital property subject to distribution (when both spouses worked together and made it grow).
And even this ignores the difficulty of putting a fair value on the enterprise
because goodwill must be calculated.

Contributed on 7/9/2007 by: DivorceDex.com Staff
Category: Property Division (Applicable in All States)

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