If one or both spouses in a divorce owns a business or a shared ownership of a business – whether big or small – this will most definitely play a part in the divorce process. There are many items to consider when one or both spouses is involved in a business and they are going through a divorce. For example, if both spouses are a part of the business, will one of the spouses end their role in that business? Will they sell their interest in the business to the other spouse or will both spouses agree to have the business sold in its entirety?
A business can add an extra layer of complexity onto the divorce process. Because of this, it is important to have trusted legal counsel that can advise as to how the business interests should be addressed in the divorce proceeding, including whether to obtain a business valuation from a reputable firm or an accredited valuation analyst. In regard to the business valuation, it is sometimes beneficial for both spouses to agree on a single valuation firm or individual to complete the process because the process of valuing a business is time-consuming and expensive. However, there are cases where the legal issues involved might require the retention of an expert solely to advocate your position. An experienced divorce attorney can help you with your specific business valuation. In addition to the above information, below is more information you should know about business valuations when going through a divorce:
Is the business a joint asset?
If the business interest was acquired during the marriage, it will most likely be considered a marital asset. If it was acquired prior to marriage, this does not mean that the other spouse will not be able to take value from it. There are many factors that will be considered such as financial and labor-related contributions, support of the family and household from one spouse while the other spouse runs the business, etc.
How is a business evaluated?
A business can be valued in multiple ways, with three most common methods being a market-based approach, income-based approach, or asset-based approach. The best approach to employ will depend on the business and the facts involved in the case. The valuation method will determine the fair market value for the business, which is the price a willing buyer would pay a willing seller when neither is under any pressure to buy or sell.
RELATED: Read these top divorce questions and answers for business owners.
What kind of assets are considered in a business valuation?
Business assets are all the items that can show value on a balance sheet such as buildings, land, equipment, vehicles, cash, supplies, in addition to those items that are not as easily shown on a spreadsheet such as intellectual property and goodwill.
Owning a business during a divorce can create additional complications during the divorce process. Luckily, an experienced divorce attorney will be able to guide you through the process for your unique business situation.
Over the years, Wilder Mahood McKinley & Oglesby has successfully represented hundreds of clients, ranging from small-business owners to shareholders in multimillion-dollar corporations. If you are a business owner and are seriously considering divorce, contact us online or call us at 412-261-4040.
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