Determining the Value of the Business During Divorce

July 08, 2011

Determining the Value of the Business During Divorce

Over 50 percent of marriages will end in divorce. For those who go through this process, many issues have to be resolved. Marital property has to be financially divided so that each spouse will receive their fair share. It can be difficult to evaluate, especially if one of the spouses, or both, owns a business.

The business itself can be one of the largest assets in a marriage. As such, taking a divorcing spouse's word about the value is not the best approach. Properly determining the value of the business is one of most important steps divorcing couples can take.

Business Valuation

A business valuation is often conducted by a professional business appraiser. Unlike an accountant, an appraiser will calculate the past history of making a profit and the exact amount of its current assets and liabilities. He or she will also make a projection as to the amount of the business's future earnings. This will give the appraiser the business' financial worth from the past and in the future.

The methods appraisers use to calculate the value of the company can vary depending on the type of business. Some may analyze cash flow, business assets or replacement costs, while others may focus on the sales of comparable companies or products.

Upon completion of the business valuation, both spouses can make informed financial decisions. They can continue to work in the business, it can be sold and the funds split equitably between them, or one spouse can buy out the other and take full control and ownership of the company, for example.

Working With an Attorney

While appraisers can help with the value of the business, divorce involves other important considerations as well. Spousal support, child support and visitation are among the many other issues that need to be resolved.

The decisions that are made during the divorce process will determine your financial status for years to come. If you are going through or considering divorce, contact an experienced attorney to discuss your case.

Article provided by Army & Army, L.L.C.
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