Why business valuation matters in your divorce

On Behalf of | Dec 27, 2022 | Divorce |

A high-asset divorce can be a costly financial transaction. Since California is a community property state, you’ll receive an equal share of the marital estate, which should alleviate some of your financial burdens post-divorce. However, your property division resolution is only as good as your investigation into implicated marital assets. After all, if your spouse hides assets from you and you don’t catch them, you’re not going to obtain your fair share of them.

This is problematic in many instances, but those who have a family business may struggle the most with ensuring that they recover the assets that they deserve. This is because the spouse who controls the business might inflate debts or deflate income to try to block you from accessing the true value of the business. Therefore, business valuation is critical during the divorce process.

How your family business may be valuated

 There are different approaches to business valuation. You have to find the one that works best for you and that you think will give you the most accurate estimate of the business’s worth. Let’s look at some of the valuation strategies that you might be able to deploy in your case:

  • Income approach: With this strategy, you look at the business as it currently stands and try to determine the amount of income that it’s expected to generate in the future. To reach this calculation, you may look at revenues, expenses and historical data.
  • Market approach: This method seeks to put an accurate appraisal value on the business. To do so, you’ll be required to look at comparable businesses in your area that have gone on the market and that have similar assets. Although this option may give you an accurate valuation, it’s often difficult to find comparable businesses that can give you the information that you need.
  • Asset approach: Here, you look at the value of your assets and subtract any existing liabilities. That may sound simple enough, but there are often intangible assets that can complicate matters.

There are other ways to valuate a business, which is why it’s important that you do your homework to figure out the best path forward for you. Of course, you and your spouse may not agree on valuation method, which is why you should be prepared for litigation at every stage of your divorce.

In order to make strong legal arguments during litigation, you’ll have to have an understanding of these valuation methods and be able to clearly articulate why you think one method is better than the other. Remember, too, the outcome of your dispute here can have tremendous implications for your financial stability post-divorce. That’s why you might want to consider having a legal advocate by your side as you navigate these business-related issues.

How an attorney can help you

 A legal advocate can be extremely valuable during your divorce. They can help you initiate forensic accounting practices that may uncover hidden assets and provide valuable insight into the standing of your family business, and they can help you create the targeted legal arguments that you need on your side to maximize your chances of being successful.

Remember, too, that there are other legal issues that you’re going to be facing outside of those involving your family business. That’s why as you walk through your divorce, you’ll want to have someone on your side who understands the intricacies of your case and can zealously advocate for you along the way. If that sounds enticing to you, please consider reaching out to a law firm like ours for additional guidance.


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