The valuation of a business isn’t always obvious; instead, the way that asset division evolves in each divorce case can vary on a business-to-business basis. The following takes a look at some different ways that a business is valuated in divorce and what steps that you can take to ensure that you get a fair and equitable division of assets when separating from your spouse.
Fair Market Value/Market Approach
One of the most common ways to valuate a business during a divorce is the fair market value, also known as the market approach. The fair market value of a company refers to what a third-party buyer would be willing to pay for the enterprise. It is critical that, if using the market approach to valuate a business, a third-party appraiser is used. Sometimes, appraisers will undervalue or overvalue a company in the interest of a client.
Book Value Method
The book value method does not look at the business’s market value exclusively. Instead, this valuation method considers assets and liabilities when valuing the company. An appraiser will consider any decrease in value that the business has experienced, as well as any increases in value. Don’t make the mistake, when valuing marriage property, of ignoring debt or ignoring the numbers.
How Will Our Business be Valuated?
If your business is community property, then it’s up for division when you and your spouse divorce. The way that the enterprise is valuated may depend upon the existence of an already existing contract, or by a buy/sell agreement. In either method, things like the value of actual goods (inventory, property, machinery, etc.) and intangible goods (like a trademark or logo) will be considered.
Protecting a Business in Divorce
Businesses are often incredibly valuable. Because Washington Law calls for the just and equitable distribution of property, a business must often be divided.
- One partner may buy the company from the other
- One partner may choose to release his/her rights to the company in exchange for something else (like the house)
- The couple can sell the business and split the profits
You can protect your right to business profits in a divorce by investing in the services of a family law attorney.
Call a Divorce Lawyer Today
At the Law Offices of Molly B. Kenny, let Ms. Kenny find the best business appraiser to evaluate your business and help you determine how it should be divided amongst you and your divorcing spouse. Call 425-460-0550 to learn more about how your specific situation. Or, fill out our easy online contact form for quick response.
