Assessing the Value of a Business in a Divorce

Valuing a Business in a DivorceYou may need professional analysis in valuing a business in a divorce. Businesses can vary in worth; if the value is in dispute, an expert recommended by your attorney can provide concrete evaluations of the value of the business.

Calculating Income

It will be beneficial in your case to know the income of the business. This can be useful in coming to a conclusion as to its value, but also in formulating the amount of alimony and child support that will be provided as part of the divorce settlement.

If the participants know the details of the business, it might be possible to come to an agreement concerning business income. If one party involved in the divorce does not have knowledge of the business but is capable of understanding financial concepts, reviewing the company's records could facilitate an agreement on income. If one party does not have knowledge of the business and doesn't have the ability to learn about it, a financial expert can be useful.

Determining the Minimum Value of the Business

The first step when coming to a conclusion as to the minimum value of the business is to find what the company's assets are worth. This can be accomplished by agreement on the value of the assets, by seeking public information, or having an expert appraise the value.

The debts are then calculated. The minimum value of the business will be the debts subtracted from the assets. Our attorneys are experienced in the process of establishing minimum value and will advise you as to whether an expert is required.

Comparing the Owner's Salary with Others in the Same or Similar Position

The business owner will likely have a certain income comparable to the average salaries for similar jobs and careers. Statistics can be found on the website http://www.bls.gov. This is the online home of the U.S. Department of Labor Bureau, Labor Statistics.

The average amount of money earned from a business (post-adjustment) can be an indicator of the value of the business or will tell the divorce attorney to retain a professional business appraiser. In all probability, a business that is paying an owner an amount that is in line with what the owner would be paid if he or she was employed by someone else will be judged to have a minimum value. If the business earns substantially higher earnings for an owner in comparison to a person earning a salary, it is likely that the business will be more valuable than the minimum.

For a person or company interested in buying the business, the value might be greater than a simple calculation of the assets if it earns more for the owner than it would if the owner were simply working on salary. In this circumstance, an expert appraiser should be a consideration to get a reasonable estimate on the value of the business. The value of a business can be a complex issue in a divorce. If you are divorcing and there is a business involved, it is imperative to know the value of the business.