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A divorcing couple may disagree about business valuation

If you and your spouse are facing divorce, you are undoubtedly concerned about property division, including how you will handle the distribution of your family business.

The two of you may disagree about how much your business is worth, but there are professionals who can help with an appraisal that the court can use to determine value.

Establishing value

The first step is to establish a standard of value, which involves working with hypothetical conditions for use in determining what the business is worth. Both fair value and fair market value are the standards that are normally considered. While the two are similar, the latter refers to the price of the business if it were to change hands between a willing seller and a willing buyer. The former, or fair value, has to do with the context of use of the business, and the court will guide this during the property distribution phase of the divorce proceeding.

Providing clarity

If a shareholder agreement is in place, the matter of dividing the business will be easier. If you and your spouse developed such an agreement, it probably contains guidelines to follow, such as valuing your respective interests in the business and assigning ownership if the two of you decide to end your marriage. You could also have a prenuptial agreement in which you have covered these points. 

Identifying fraud

If your spouse was largely in charge of the financial side of the business, be aware that there could be hidden assets. He or she may overstate expenses and understate revenue. If you suspect that there are concealed business assets, you may want to approve the hiring of a forensic accountant to investigate.

Carrying on

In the process of reaching an appropriate business valuation, you can rely on the assistance of professionals. Whether you wish to be involved with the business going forward or prefer to distance yourself from it, you will also have options for the divorce case, such as mediation versus litigation, to help you achieve a full and fair settlement.

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