In Focus: Business Valuations During a Divorce
As many can attest, going through a divorce is never easy, and the process can become more challenging when one or both spouses owns or operates a closely-held business or professional practice. It is worth noting that business interests are considered marital property subject to the rules of equitable distribution in Florida. When it comes to determining the business valuation, therefore, it is crucial to enlist the services of an attorney adept at resolving property divisions in a divorce.
How is the value of a business determined?
Generally, there are three ways to ascertain the value of a business — the asset approach, income approach or market approach:
Asset approach — The business’ liabilities are subtracted from its assets to calculate the basic value, which does not consider goodwill or market conditions
Income approach — This method arrives at both the present and future value of the business by factoring its past earnings, projected future earnings, future cash flow and capitalization
Market approach — Looks to other similar businesses that have actually been sold based on factors such as revenue, earnings, fixed assets, book value ( owner’s equity), market conditions and risk
Often, the parties will reach an arrangement on dividing marital property in a divorce settlement or already have a prenuptial agreement in place. If not, Florida courts will divide marital property equitably. This does not mean equally, but rather, in a way that is fair and reasonable to both parties.
As it relates to business interests, the courts are likely to award a business to the spouse who actually owns or runs the enterprise. In exchange, the other spouse is typically awarded other marital assets or cash to offset the value of the business, and any contributions he or she may have made to it.
Why You Need a Florida Divorce Attorney
If your divorce involves valuing and distributing a business, it is crucial to have proper legal representation. An experienced Florida divorce attorney typically collaborates with a network of financial professionals and accountants to arrive at accurate business valuations.
Whether you are looking to protect your business, or obtain your fair share of the marital assets, Blair Chan Law, PLLC is here to help. We have decades of experience helping clients navigate the complexities of divorce and guiding them through this difficult transition. Call our office today or complete the contact form on our website to set up a consultation.