EHL
Date: December 17, 2024
Sub ID: 3708307
Writer ID: 10-011801
Post Type: TOPICAL
Topic Choice: Family Law
Post Title: Determining the value of your business for divorce
In equitable distribution states such as Virginia, courts determine how to divide marital property fairly and equitably between divorcing spouses. Before making these decisions, the court must determine the value of each marital asset.
Determining the value of certain assets, such as a business, can be a complex process dependent on the type of business, financial performance, and contributions of each spouse.
How is a business valued?
There are several potential ways to value a business. Here are some of the most used methods:
- Income-based approach: Value depends on the earning potential of the business.
- Market-based approach: Value depends on businesses in the same industry that were recently sold.
- Asset-based approach: Value depends on value of both tangible and intangible assets.
What factors can impact the value of the business?
Several factors can have an impact on the value of a business. These factors may include:
- Business profitability.
- Debts/liabilities.
- Market position.
- Reputation, customer relationships, etc.
- Potential for growth.
The court will likely determine the value of the business at the time of the couple’s separation by considering appraisals from a business appraiser or financial expert to ensure that their final valuation is accurate.
Valuing a business can be one of the most complicated parts of your divorce. In many family law cases, both spouses contributed to the business and are therefore invested financially and emotionally in the success of the business, even if the marriage is ending. It is important to acquire accurate appraisals to make sure that both parties are fairly compensated in the divorce. However, due to intangible assets, challenging ownership structures and other issues, the valuation process can be difficult.