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The importance of business valuation in your divorce

The importance of business valuation in your divorce

On Behalf of | Jun 22, 2022 | Divorce |

As a business owner, your enterprise is your livelihood. Some or all of your business may be a marital asset, though, so it is important to take steps to protect as much of your company as possible during a divorce.

Getting an accurate business valuation is an essential part of the divorce process for business owners. Understanding how valuation works and what it can do to benefit you will help with achieving the best possible outcome for your professional future.

What is a business valuation?

When you subject your business to a professional valuation, an unbiased appraiser will account for all finances, real estate and other assets associated with the business to determine its true value. Knowing the exact worth of your business is crucial for a fair division of property during your divorce. Undervaluing your company will result in you receiving less than you deserve in the split while overvaluing entails that your ex-spouse receives more than they are due.

Can a valuation protect your business?

An accurate valuation can be useful to you beyond simply ensuring that each spouse gets their fair share of marital property in a divorce. If keeping the business intact is your priority, you can use the unbiased valuation as the basis for offering to buy out your spouse’s share of the company. In the event that a buyout is not an option, you might use the valuation as a tool for liquidating the company and then split the proceeds. In this way, you can use your share to start a fresh enterprise rather than attempting to run a fractured company.

Dividing a business as a marital asset is a messy affair. However, a business valuation opens several options for settling the division of assets in a way that satisfies both parties.