Divorce and a business can make an already complicated process even more complex. When there is a business involved there must be a value placed on that business. If the business was owned by one party prior to the marriage the value of that separate property interest must also be considered.
Even in the best of times, this is a contentious issue, and a divorcing couple may have different opinions of the business value. If you are using the traditional litigated divorce process, you will each have your own expert value the business. It is highly possible that those valuations will differ.
Valuing a business has become even more difficult in these changing times. Many businesses lost significant value during the two-year period of the pandemic. Other businesses may have experienced windfalls and gained value. Trying to place a current value on a business is difficult and may be inaccurate in this current economy.
There are several approaches that couples are taking to this difficult valuation issue:
- Wait-and-see. You can postpone valuing the business with the expectation that as the pandemic subsides, the business will begin to normalize. You resolve all the other issues and postpone resolving the business valuation until down the road. The difficulty with this approach is how long to wait? 24 months? 36 months? Meanwhile, how will the income be split? If funding for the business is required, who will be responsible for that?
- Settle now and exclude the two pandemic years. Generally, at least one party does not want to wait two or three years to settle the finances and have the divorce become final. In that case, a Collaborative Divorce will involve a neutral financial professional to help the couples value the business by excluding the two pandemic years. The professional can make sure the data is used in a way that does not skew the value.
Heberger & Company Can Help
For more information on valuing your business, and the best way to calculate that value into a fair property division, contact us at Heberger & Company An Accountancy Corporation.
From the Blog
Do We Need a Business Evaluation for Our Divorce?
One contentious issue that arises during a divorce is when there is a business asset and how to divide it. This is true whether the business is a professional business owned by one spouse, or a family business owned and operated by both spouses. Except in rare cases, the first step is to have the business's worth evaluated. How Valuation of a Business Works in a Collaborative Divorce In a … [Read More...]
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