When Business Owners Divorce: The Importance of Business Valuations

July 26, 2012

A few years back, many individuals found themselves searching for new careers after the economy plummeted. Some took jobs similar to those they left behind while others chose to make their own paths and open small businesses.

Both the Wall Street Journal and Forbes report that some entrepreneurial businessmen and women with new startups were recently hiring at "a red hot pace." In fact, Forbes notes hiring for entrepreneurial companies rose over 13 percent compared to last year, a much stronger increase than that of established companies, which reported hiring growth levels at 3 percent.

As these new businesses thrive, owners may have to address other concerns. Although there is no evidence to support the notion that divorce rates are higher for business owners than other couples, it is hard to ignore the high level of stress and long hours required to run a successful business. Unfortunately, these factors can play roles in the breakdown of a marriage.

This can lead owners and their spouses to wonder: what happens to the business in a divorce?

Splitting a Business in Divorce

When both partners are shareholders or partners in a business, one may buy out the other's interest. In this instance, it is important to have an accurate business valuation not only to protect the interests of both parties, but also to ensure a smooth transition of business ownership without disrupting the business' daily operations.

The most efficient way to complete a valuation is by using an expert business appraiser with either a Certified Business Appraiser, or CBA, or Accredited Senior Appraiser, or ASA, certification.

One of the more difficult components to determine within a business valuation is putting a dollar amount on intangible goodwill. Essentially, goodwill refers to the reputation a business or business owner has in the community.

Goodwill is broken into two types: personal and commercial. Personal goodwill is tied directly to the person running the company and refers to qualities like a reputation for honesty or intelligence. Commercial goodwill is attached to the business itself and includes things like the business' location.

Navigating the intricacies inherent to business valuations in divorce is difficult. It is wise to seek the counsel of an experienced business valuation divorce attorney to better protect your property rights and maximize your settlement in a divorce.

Article provided by O'Neil & Attorneys Family Law
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