July 08 , 2022
Not many people enter into a divorce negotiation expecting things to go smoothly. But with careful planning and an understanding of the business value at stake, you can give yourself the best chance for a favorable outcome. This article will explore how to identify and protect your business assets during divorce negotiations and ensure you get an adequately valued portion of that business during a divorce.
When it comes to divorce negotiations, the business value of a company is one of the most important factors to consider. If one spouse owns a company, they may be tempted to try and undervalue the business, while the "non-owner" spouse may be tempted to overvalue the business. I see the latter all the time in divorce negotiations - accomplished by hiring a valuation "expert" who manufactures a result through bias and other methods. Detecting and calling out bias is one of our specialties and we have been succesful doing so in court proceedings.
At its basic level, there are a few different ways to value a business for divorce purposes. The primary method used is to look at the company's fair market value and what it would be worth if it were sold on the open market. Another option is to look at the business's fair value depending on legal guidance in the state. Both consider things like the company's earnings/cash flow, risk profile, the brand's value, and the company's goodwill. Burns Valuation Consulting can help determine the best way to value your business for divorce negotiations. We have experience working with individuals, businesses of all sizes, and various industries over our 20+ years of business valuation experience.
When calculating the business value during a divorce negotiation, the company's assets, liabilities, risk, and earnings/cash flow are the primary factors considered. The value of the business is not just the sum of its parts. Other considerations such as future earning potential and intangible assets must also be taken into account. This process can be complex, so it is essential to consult a professional valuation expert to ensure an accurate assessment that will take into account all of the relevant factors to ensure a fair settlement.
The business valuator's role in divorce negotiations is critical in ensuring that the business value is accurately determined. They will analyze and determine how each of the following impacts business value:
This information is essential in negotiating a fair settlement for both parties and should be considered without bias from either side. In addition, too often, people make a few common mistakes during divorce negotiations that can negatively impact the outcome. These include:
When a couple with a family-owned business divorces, dividing up the assets can be complicated. The business's value must be determined to come to a fair and equitable divorce settlement. Burns Valuation Consulting can help you choose the value of your business so that you can get a fair settlement in your divorce. We will consider all of the factors that influence the value of your business, including the recent changes to the tax law. Contact us today to learn more about how we can help you.
Or contact Brad Burns CVA CFA directly at 770-380-2406 or Brad@BurnsValuationConsulting.com for a free consultation.