What You Need to Know About Business Valuation in Divorce

In divorce, a couple’s assets are valued and equitably split. Even without a business, this process can be complex and full of contention. When you add in the intricacies of a closely held company, the valuing and splitting of a marital estate becomes even more complicated. If you are planning on filing for divorce, understand how a sole- or joint-owned business could affect the outcome of your settlement.

Is Your Business Part of the Marital Estate?

Couples often assume that a business started or acquired prior to the marriage will automatically be excluded from the marital estate. This is not always the case. If marital funds and the business were in any way co-mingled, a portion of the business and its interest may become marital property. If, for example, a wife inherited a business from her father prior to marriage and then used marital funds to purchase advertising, half of the money used and any increase in profits could become subject to equitable distribution. Further, any business started with marital assets or after the marriage began will almost always be included in the marital estate.

Determining the Value of a Business

Valuation of a business is one of the most complex legal processes of divorce. Not only does the fair market value have to be considered. Store equipment, like furniture, computers, and inventory must also be valued. Debts, taxes, insurance, payroll, and other expenses must be subtracted from profits. In addition, the potential growth and future profits of a business are often factored into the value of a business. This is why it is so critical that couples seek the assistance of a skilled divorce attorney – one that has extensive experience in valuing businesses during divorce.

Protecting Your Business During Divorce

When a business – or a portion of a business – is considered part of the marital estate, it becomes at risk for downsizing and/or closure. As such, it is important to know how to effectively protect your business, and its future, during the process of divorce. Each business and situation is unique, so it is important to have the assistance of a skilled attorney. However, a few ideas for protecting your business might include:

  • “Buying” your spouse’s portion of the business with other, equally valued assets within your marital estate;
  • Co-owning the business with your spouse (generally works best in amicable divorces); and
  • Ensuring the business and its debts are accurately valued.
  • How Our Divorce Attorneys Can Help

At Sullivan Talyor & Gumina, P.C., we know that your future relies heavily on how a business is valued and distributed during your divorce. Our Naperville divorce lawyers work closely with forensic accountants, business appraisers, and other financial experts to determine the true and accurate value of businesses. Committed to your best interests, we fight aggressively to help you get the settlement you deserve. To learn more, call us at 630-665-7676 and schedule your initial consultation today.

Source:

http://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm

http://canadabusiness.ca/eng/page/2725/