Divorce divides not only your household but also any jointly-owned business. Before you file for divorce as a business owner, you should understand the expectations for the business in the final decree. Whether one of you will buy out the other’s interest or you wish to divide the assets evenly, you need to know how much your business is worth.
There are a few ways to conduct a business valuation for divorce purposes.
Similar business sales
One way to value your business is through similar business sales records. If a business of similar size and activity recently sold, use that sale price as the foundation of your company’s valuation. Adjust that rate according to any differences in inventory value or other variations.
The company’s assets offer another way to determine its value. Consider the value of the company’s assets, including not only tangible equipment but also intellectual property. The company’s recorded assets can serve as a foundation for the company’s valuation.
Income statement valuation
If you want a business valuation based on the company’s actual revenues and cash flow, an income statement assessment is the way to go. Ask the court to appoint a forensic accountant as an impartial third party to complete the process.
Including a business in your divorce makes the process more complex. Understanding the most common ways to value that business helps you to choose the best method for your situation. If you and your spouse cannot agree on a valuation method, the judge will choose one for you.