Few valuation adjustments draw attention faster than a discount that reduces a marital business interest by a large amount. The owner considers it obvious; the other spouse considers it a disappearing act. Neither reaction settles the question. Discounts for lack of control and for lack of marketability address different economic limitations, and each needs a reason grounded in the interest actually being valued.
Identify the assignment before choosing a percentage
Florida’s section 61.075 specifies fair market value for a marital interest in a closely held business. That standard describes a hypothetical transaction between informed, willing participants under no compulsion. The expert then has to identify the ownership interest, its rights, and the valuation date before any adjustment is considered.
A discount for lack of control reflects an owner’s limited ability to direct important business decisions. A discount for lack of marketability reflects limits on converting the interest to cash through a sale. An interest can present either limitation, both, or neither to a degree that warrants a separate adjustment.
The legal setting matters. Florida’s corporate appraisal-rights statute, section 607.1301, defines fair value in that setting without discounts for marketability or minority status. That rule belongs to appraisal-rights proceedings. It does not transfer automatically to a divorce valuation governed by a different provision.
The absence of a planned sale does not answer the valuation question either. In Erp v. Erp, the Second District affirmed a trial court’s acceptance of an evidence-supported marketability discount when valuing the parties’ combined 80 percent marital interest in a closely held S corporation. The court did not apply a separate minority discount to the spouses’ individual 40 percent holdings.
That is permission to analyze the evidence, not a percentage to copy. The assignment should state what is being valued and why any separate adjustment belongs in the calculation.
Control depends on rights and the ownership being valued
The ownership percentage is the starting point, not the whole description. Voting provisions, board appointment rights, distribution policies, supermajority requirements, and contractual protections can change what an owner can actually do.
A small interest with meaningful veto or redemption rights differs from an equally small interest with no influence and no exit. A majority percentage may operate within contractual limits. The governing documents deserve more attention than the capitalization table.
The ownership unit being valued also matters, and Erp shows why. Each spouse held 40 percent, the husband received the combined 80 percent interest, and the valuation the court accepted treated that combined block as the subject rather than discounting each spouse’s holding as a standalone minority.
Counsel and the expert should therefore settle the relevant ownership unit before debating adjustments. Valuing a combined controlling block raises different questions from valuing a standalone interest that lacks control. The report should make that assumption explicit.
The starting value must be understood as well. Some methods and market data already reflect the position of a noncontrolling owner. Layering a control adjustment on top of a starting value that already reflects it subtracts the same limitation twice.
Marketability requires evidence about the route to cash
Private ownership does not establish one universal marketability discount. The expected holding period, distributions, transfer restrictions, the pool of likely buyers, the quality of financial information, and the prospects for a liquidity event all shape the analysis.
An owner receiving reliable distributions is in a different economic position from an owner whose capital is tied up indefinitely with no cash return. A credible redemption mechanism also affects liquidity, and its practical value depends on the terms, the funding, and the company’s ability to perform.
Cash on the company’s balance sheet is not automatically cash available to the subject owner. Operating needs, debt covenants, and the owner’s power to compel a distribution all intervene. A liquidity analysis has to connect the balance sheet to an actual mechanism for receiving money.
The opposing evidence deserves equal attention. In Miller v. Miller, the Fifth District upheld a trial court’s refusal to apply a marketability discount where the evidence supported the company’s ready marketability, high income, and high rate of return. The result depended on the record presented.
A sale of the entire business may say little about the market for an isolated minority holding. Ask whether the subject owner could have participated on comparable terms and whether the transaction conveyed different rights. The interest described by the evidence has to match the interest described by the conclusion.
Studies and models can inform an opinion, but they need a connection to the subject interest. Differences in holding period, distributions, company risk, and transaction rights should be explained. A published average is not an appointment with this company’s facts.
Business risk also has to be separated from liquidity risk. Customer concentration, unstable earnings, or dependence on a key employee may already be reflected in the projected cash flow or the multiple. The expert should identify any additional marketability effect without charging the same concern to value twice.
Illustration: two discounts do not simply add
Assume a hypothetical business has an equity value of $2 million at a level that does not yet reflect the subject interest’s lack of control or marketability. A standalone 30 percent interest begins at a proportionate $600,000. Assume counsel’s instructions and the governing facts support valuing that interest on its own.
For illustration only, suppose the evidence supports a 10 percent lack-of-control adjustment. Applied to $600,000, it produces $540,000. Suppose a separate 15 percent marketability adjustment is also supported and not already reflected anywhere.
The second adjustment applies to $540,000 and produces $459,000. The combined reduction from $600,000 is $141,000, or 23.5 percent. Adding 10 and 15 and deducting 25 percent would produce a different and incorrect result under the stated assumptions.
The percentages are illustrative, not recommended ranges or Florida benchmarks. Each would need its own support, and either could be inappropriate in an actual assignment. The arithmetic only matters once the harder questions have been answered.
The example also assumes the $2 million is equity value after proper treatment of debt and other items. Applying an ownership percentage to operating business value without reconciling debt and nonoperating assets creates a separate error before any discount enters the room.
A sensitivity schedule can show how the conclusion moves under disputed assumptions. Presenting alternatives is not a substitute for a supported opinion. The reader needs to know which assumptions the expert accepts and why.
Build a record that explains the adjustment
The most useful documents establish rights, economics, and realistic transfer opportunities:
- Governing agreements, amendments, and documents defining voting, distribution, and transfer rights.
- A complete ownership schedule, including related interests and any classes of equity.
- Historical distributions, owner compensation, financial statements, and relevant forecasts.
- Redemption provisions, funding records, purchase offers, and completed ownership transactions.
- Information about likely buyers, sale processes, and the expected time to achieve liquidity.
- The valuation methods and market data used before any separate discount.
- The studies, models, and company-specific facts supporting each proposed adjustment.
Read those materials together. An agreement may permit redemption while the company’s finances make prompt payment unlikely. A prior transfer may have involved family terms that limit its usefulness as market evidence.
The report should explain why the evidence supports the selected amount within any observed range. Attaching a study leaves the most important reasoning unfinished. The link between the data and the subject interest is the opinion’s foundation.
Comparing two reports starts with the level of value each one produced. One expert may conclude a controlling, marketable value and stop; the other may apply interest-level adjustments. The reports are not comparable until both sit at the same level, and the difference in adjustments is often the entire gap between them. A schedule that shows each report’s starting value, each adjustment, and the resulting level makes the disagreement legible to counsel and to the court.
When reviewing an opposing expert’s work, trace each adjustment through the entire calculation. Determine whether control or liquidity limitations already appear in the earnings, the capitalization rate, the comparable transactions, or another adjustment. The labels can differ while the economic deduction is the same.
A defensible discount explains the interest’s actual limitations. Identify the rights, examine the route to liquidity, and check what the starting value already reflects. The percentage is the result of that work, not the opening proposal.
This article is general information, not legal or financial advice. Every case turns on its own facts and on the law of the jurisdiction.
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Samons Harris 