Spouses preparing for divorce often focus on certain financial issues. Higher-value assets can quickly become sources of conflict in pending divorce proceedings. Spouses may disagree about the most reasonable and fair way to address those assets when they divorce.
A business represents not just a major investment but also a continuing stream of revenue. Small companies and professional practices can trigger intense disputes during property division negotiations. Those attempting to protect the business or professional practice they run, and those seeking a fair share of their marital estate, need to know what a company is worth to address it effectively.
Business valuation is a complex process
For some assets, there is a straightforward process for setting a fair market value. People hire appraisers to look at the condition of a home and then compare it to comparable properties that have sold on the local market in recent months. If the spouses each secure an appraisal with different results, they can meet the middle between the two proposed values.
Valuing a business involves many considerations, and the potential for major discrepancies between the values set by each spouse is a real concern. There are actually numerous different valuation models that spouses can use. Some of those valuation models look at what the company might be worth if owners decide to sell the organization. Other valuation systems look at future sales and company contracts.
The purpose of the company, the current economy and a host of other factors influence which approach is most appropriate. In some cases, spouses may reach vastly different valuations and may even use different valuation models when determining what the company is worth.
The discrepancy in the value set or the differences during the valuation process can lead to stalled negotiations and even allegations of misconduct. Spouses may fight over what the company is worth, who should retain ownership or how they divide the value of the company as part of the overall marital estate.
Having assistance during the valuation process and when setting goals for an upcoming divorce can help people preserve their interest in a company and/or protect the company itself. Businesses can create a host of complications for divorcing spouses, which may require a measured approach to better ensure the best outcome possible.
