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How to value a cash business?

Has anyone found an effective and cost-efficient way to cond guyingorillasuit01/28/18
Look to her expenses. Discovery is key here. Look at credit cocolawyer01/30/18
I’ve spoke to a friend who bought a tea shop and they had rising1l01/28/18
Doubt anyone will see the 2nd set of books. Unless you are 2ski01/28/18
Backdoor the valuation by doing a forensic lifestyle analysi psusurf01/28/18
This is a great idea, but this woman is known for living fru guyingorillasuit01/28/18
Double post. guyingorillasuit01/28/18
Assuming she keeps appointment books, do you have no way to wutwutwut01/28/18
This is also a good idea. She is self-represented, and speak guyingorillasuit01/28/18
Watergate her office and copy the appt books? Offered in wutwutwut01/28/18
Set up video cam inside a car/van with view of entrance. T 2ski01/29/18
What about your client's own eyewitness testimony? If he saw onehell01/29/18
I recently had a judge slam opposing counsel on that very is thirdtierlaw01/29/18
In New Jersey, it is my understanding judges have to report lolwutjobs01/29/18
Okay after reading everything there was some people who prev cocolawyer01/30/18
That is the sad reality of family law. Sometimes you need to thirdtierlaw01/30/18
guyingorillasuit (Jan 28, 2018 - 4:23 pm)

Has anyone found an effective and cost-efficient way to conduct a valuation of a cash business, or at least to determine its income? In one of my cases, the other party runs a beauty salon, and claims that she takes home $2,500 a month, which I know is ridiculous. The problem is that she mostly gets paid in cash. I can't think of anything short of hiring an investigator to sit outside the business and count the number of customers. Any ideas here?

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cocolawyer (Jan 30, 2018 - 12:11 am)

Look to her expenses. Discovery is key here. Look at credit cards. Request all documents related to her expenses for the last year. Demand all documents related to any applications for credit. At some point the costs and expenses tell a tale of what amount she really makes. Once you have that information, you can hire a business valuation and have your expert put it together.

If the expenses are non-existent, no credit checks, not put into bank accounts...well you are asking the question every family law attorney from the dawn of time asks. Even a PI I mean what is he going to say? "I saw 25 people go in and I saw cash exchanged." Okay that gives you a rough rough rough idea. I guess. The other route is going to go a long way in court. Once you have it from her you can also depose her.

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rising1l (Jan 28, 2018 - 5:23 pm)

I’ve spoke to a friend who bought a tea shop and they had a mostly cash business. So for a lot of these cash businesses they have 2 separate ledgers. One official and one “unofficial.”

After you see the unofficial you can verify by have someone sit in the shop for a day or two and just count how many customers come through.

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2ski (Jan 28, 2018 - 6:33 pm)

Doubt anyone will see the 2nd set of books. Unless you are proposing to 'buy' business. Hint.

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psusurf (Jan 28, 2018 - 8:45 pm)

Backdoor the valuation by doing a forensic lifestyle analysis. Most cash businesses....i.e landscapers, contractors, car washes Are all notorious for this. Last landscaper I had lived in a million dollar house, drove a bentley, wore a 50k Rolex and reported he earned 30k per year. Forensic report came out at around 500k per year, all through a lifestyle analysis. Needless to say that case went through arbitration and never hit the court.

You can also average out the number of visits per week and services provided, but would more than likely need a PI for that. Most forensic firms have standard formulas for each kind of business to ballpark based upon patrons

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guyingorillasuit (Jan 28, 2018 - 9:28 pm)

This is a great idea, but this woman is known for living frugally and stacking cash in jars. When my client was married to her, she hid jars around the house with hundreds of thousands of dollars in them in total. I think this may be customary in her home country. She now lives with her daughter, and does not show any signs of wealth.

Hiring a PI to sit outside of the business for a week would be super expensive. Even at $100 an hour, its $800 a day and $4,000 for the week, plus the cost of the forensic. I don't know if my client would want to pay for it. Also, the trouble is that how do we know what type of treatment each client is going in for: an expensive treatment or a cheap one? Tough to calculate cash flow that way.

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guyingorillasuit (Jan 28, 2018 - 9:28 pm)

Double post.

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wutwutwut (Jan 28, 2018 - 9:37 pm)

Assuming she keeps appointment books, do you have no way to demand those?

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guyingorillasuit (Jan 28, 2018 - 11:18 pm)

This is also a good idea. She is self-represented, and speaks very little English. She wouldn't understand the discovery process, and I would spend months going back and forth on motions to compel, with the judge spelling out to her what exactly she has to do. In the end, she is likely to doctor the books. Litigating against self-represented people who require a translator is among the most frustrating cases you can get.

However, I like all these ideas!

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wutwutwut (Jan 28, 2018 - 11:42 pm)

Watergate her office and copy the appt books?

Offered in jest, of course.

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2ski (Jan 29, 2018 - 10:16 am)

Set up video cam inside a car/van with view of entrance. Then have your intern review tape and count customers. You have before and after evidence of what each customer had performed.

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onehell (Jan 29, 2018 - 2:00 pm)

What about your client's own eyewitness testimony? If he saw jars of cash all over the house when they were married, he can testify to that and to his own estimation of actual income (subject of course to the need to advise that if they filed a joint tax return he might be admitting that he lied on it, though the divorce court probably doesn't care about an IRS issue).

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thirdtierlaw (Jan 29, 2018 - 3:10 pm)

I recently had a judge slam opposing counsel on that very issue. My client was a contractor and as far as I could tell not very successful. I did my due diligence and after lengthy discovery the opposing party was convinced he was much better off. We get to a final hearing, opposing counsel is grilling my client non-stop on his tax returns from when they were married, accusing him of hiding money, etc. When her client was on the stand, I stand up and my first question was, "This is your signature all on all of three of these joint tax returns, correct?" She says, yes. Before she starts to elaborate I cut her off and ask if she signed it under the threat of perjury and whatever, that nonsense about tax fraud says at the bottom of the return. She says yes again.

The Judge used to be a federal public defender. He interjects, and says, "I believe I know what Attorney Third's next question is going to be, Attorney [Plaintiff's attorney] are you 100% sure that you want your client to answer the next question? Or does it make sense for everyone to just stipulate that the tax returns are accurate? I'd hate to have an admission to a felony on the record."

So at least this one judge was worried about it.

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lolwutjobs (Jan 29, 2018 - 11:23 pm)

In New Jersey, it is my understanding judges have to report these type of tax issues

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cocolawyer (Jan 30, 2018 - 12:16 am)

Okay after reading everything there was some people who previously stated some of what I had proposed...some other ideas as well.

I think your issue is that your client doesn't have the stomach (and the wallet) for the war. It's hard to come to the bottom of a rabbit hole without hard work, time, dedication, and use of resources. Unfortunately that takes time and money. If you find it you can hit her with disclosure and fiduciary breach of duty sanctions, but you got to get there first.

I have no answers of a quick fix, that has very little expenses, with a seemingly shorter timeframe.

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thirdtierlaw (Jan 30, 2018 - 10:47 am)

That is the sad reality of family law. Sometimes you need to have that tough conversation. "She is lying, we know she is lying, but is it worth spending $40-50k to prove it?" It's not right, but the good guys dont always win.

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