Divorce With Respect

How do you value your business before your divorce?

On Behalf of | Oct 13, 2021 | Divorce |

If your marriage is coming to an end, one of your top concerns may be ownership of your business. Even if your soon-to-be ex-spouse is not an official owner of the business, he or she may have a legal claim to some of it. That is, if your business is part of the marital estate, a judge can divide it during your divorce.

You have some options for insulating your business from the negative effects of divorce. If you must split the venture, though, coming up with a realistic valuation may be your first step.

What would a buyer pay?

One way to value a business for divorce purposes is to estimate how much a buyer would likely pay for it. With market-based valuation, you look at recent sales figures for comparable businesses that operate in your area. If you can find similar business sales, you may not have to do an in-depth book analysis to determine the worth of your business.

How many assets does your business own?

It is also possible to calculate the value of your business based upon the assets it owns. If your venture has equipment, furniture, inventory or other assets, you can simply add up their value. Going this route, of course, requires compensating for depreciation.

Is your business likely to generate future profits?

You can also use your business’s profits to estimate its worth. With this approach, you use past sales data to project future profits. These expected profits give you a ballpark figure of the value of your business.

The business valuation method you choose may affect your results. Therefore, if your spouse intends to fight for ownership, you can expect him or her to obtain a separate valuation that may differ wildly from yours.