The Role of Business Valuation in your Divorce

Having a privately held or family-operated business can add an extra layer of difficulty to any divorce process. Who has the rights to the business? Was the business a partnership or did one spouse own the business? There are three options when settling on a small business valuation.

  • One, the couple can decide on their own the valuation of the business.
  • Two, the couple can hire a joint valuation.
  • Three, each spouse can hire their own separate valuation.

Small or large, seeking to find a valuation is key to keeping any divorce amicable.

Here are a few main areas involving business valuation that you should be aware of:

Businesses, although often a source of income, are also considered assets. Just like real estate, investments, or other asset classes that may get divided, often require a professional appraisal to find its fair market value. This is due to the complexity in which a business is valued including historical revenue, projected revenue, assets, liabilities, and even market share. Like real estate, an experienced appraiser will help determine the business’s value taking into consideration a complete financial picture. When selecting an appraiser, it is important to look at the types of businesses they have given valuations to in the past and to know ifthey have experience testifying in a divorce case.
Once a value is established, the next step is to divide up the asset. This is where multiple outcomes come into play. Often, one partner has had limited involvement in the business and does not want involvement in the future, but still wants to be fairly compensated as the asset was grown under the marriage. One good option may be to buy out the other partner or come up with alternative assets such as investments or real estate that will equal their share of the business. Another option would be to sell the business outright and divide proceeds in alignment with their divorce settlement.
No matter what the outcome, finding a business valuation is a critical piece in the divorce process. If you, or someone you know is in need of assistance with a business valuation, reach out to The Gina Smalley Attorneys for more assistance. We would love to guide you through this process.

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