How To Value A Business In A Divorce
For many couples, owning a business can cause substantial strain on a relationship, and if a couple decides to file for divorce the business is often one of the most substantial assets that must be split between spouses. Determining the proper value of a business is critical, and there are a few methods available for valuation. At the law office of Blair H. Chan, III we can help decide what valuation method is best for your case and ensure that you are walking away with what you deserve from your Florida divorce. To learn more, call or contact our office today to schedule a case consultation.
Florida Property Division
Florida is an equitable division state, which means that all marital property must be split equitably, but not necessarily equally, between spouses. If one spouse owned a business prior to the marriage it may be considered separate property and revert to that spouse in a divorce. However, if the business was started after the marriage it is likely considered marital property, and the value of the business must be split equitably between spouses.
The first method for valuing a business is through the asset approach. This is the simplest method for determining the value of a business, which is taking the total assets minus the total liabilities of the company. This includes both tangible and intangible assets as well as tangible and intangible liabilities; however, this method does not consider unrecorded assets or debts that could substantially alter the outcome of the valuation. This method is best for small businesses.
The second method for determining the value of a business is through the market approach. This method is similar to appraising the value of a residential property by comparing the business to other, similar businesses in the area that have been recently sold. This method works only when there are other businesses to compare to that are similar in location, size, and industry. If there are no comps for the business, a different method should be considered.
The last option is to use the income approach, which is the most complex but often the most accurate. The income approach uses historical information about the business and inputs that information into formulas to determine the current value of the business using predictive cash flows and profit. This method utilizes future benefits as well as rates of risk and return. The income approach is the method most often used when valuing a business for a Florida divorce. To learn more about what method may be right for your situation, talk to our office today.
Call or Contact Blair H. Chan, III
Are you navigating a divorce that involves dividing the value of business interests? If so, the law office of Blair H. Chan, III can help. Call the office or contact us online to schedule a evaluation of your case today with a skilled Tampa family attorney.