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The role of a business valuation in your divorce

On Behalf of | Nov 3, 2023 | Family Law

When couples decide to end their marriage, one of the most contentious and complex issues they face is the division of assets. Among these assets, a family-owned business can be a particularly challenging element to divide fairly.

If you have an enterprise caught in the middle of a marital split, consider getting a professional valuation. It can play an important role in ensuring a just and equitable division.

Determining the business’s worth

A forensic accountant is typically hired to provide an objective, unbiased business valuation. This expert considers various factors, such as the company’s assets and liabilities, to arrive at an accurate figure. This value can serve as the baseline for negotiations or court proceedings.

Equitable division of assets

The next step is to decide how to divide the business’s value between the divorcing spouses. In some cases, the business may go entirely to one spouse while the other receives different assets or a cash settlement of equivalent value. Alternatively, they may agree to continue co-owning and operating the business post-divorce. Regardless of the arrangement, a fair division hinges on a precise business valuation.

Avoiding disputes

Accurate business valuation can prevent disputes and disagreements between divorcing spouses. Without a clear understanding of the business’s value, one party may feel they are being shortchanged or treated unfairly. This can lead to prolonged legal battles and emotional stress.

Courtroom decisions

When divorce cases go to court, judges rely on the business valuation to make fair and impartial decisions. The judge will consider the expert’s evaluation in determining how the business should divide.

The divorce rate among business owners is noticeably high, with some sources indicating it is up to 48%. Whether things are going smoothly or if divorce is already on the table, having an accurate business valuation can help you protect your interests.