In some divorces or dissolutions, one or both of the parties own a small business. When contemplating terminating your marriage, it may be necessary to conduct a valuation of the business to determine its worth or prepare for sale. This post will provide a brief overview of considerations in such circumstances.
Why Do I Need to Know the Business Value?
Whenever couples split, they have to decide the value of the marital assets and how to divide them. In some cases, it’s appropriate for one spouse to retain the business after the split and in other cases, it’s more appropriate to arrange a sale of the business. Yet, small businesses are especially hard to place a value on, which is where appraisers come in.
Who Should Appraise?
Someone who is certified in the appropriate areas and who you can count on to be qualified as an expert in appraisal. They should have adequate training and experience to perform the valuation. They will need to consider the general economic outlook, as well as that business’s particular industry. It may be prudent to obtain agreement from the other party before selecting an appraisal, as that will help avoid quibbles later about the expertise of the appraiser.
Is There One Method for Valuing That’s Better than Others?
There are three basic approaches for determining a business’s value: the income approach, the market approach, and the asset approach. Which method is most appropriate in your case will depend on a multitude of factors. It is important that your attorney have at least a basic education in these methodologies and when they should be used so she can have a meaningful conversation with the appraiser. The one thing business owners should not do is simply rely on market “rules of thumb” or generalized industry pricing, because that will fail to account for any unique variables present in that business, as well as any fluctuations in the market.
If you have a small business involved in your divorce or dissolution, schedule an initial consultation with one of our attorneys today by calling (614) 567-3031. Our attorneys are well versed in business valuation and are familiar with qualified experts who can place a reliable value on such assets.