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What’s a business worth in divorce?

On Behalf of | Sep 17, 2020 | property division |

Divorce isn’t an easy process to go through, and it can be especially hard on those with a family business. Plenty of options await owners, but they all require understanding what you’ve got.

Husband and wife teams own 3.7 million small businesses across the country. Teamwork can be an essential part of running those businesses, and marriages often fall under the same umbrella. But when one isn’t working, the other may not survive. The time could come when you have to decide what to do with the company, and you’d better know its worth.

Priced to move

There are a few ways the business can change in the divorce process. You can sell the business, divvy it up or continue with fresh guidelines. Deciding which option will work best for you depends on your circumstances, but each of these options has one requirement in common: you’ll need to know the value.

A valuable step

Business valuation is essential, but that doesn’t make it easy. There are three ways people usually apply a price tag:

  • Earning: Earnings minus expenses can give a simple idea of what a purchaser can expect if they buy a business. This approach looks for reasonable returns and can work on past records or be applied to future expectations.
  • Asset: Tallying up all of your holdings can also reveal value. Everything the business owns and owes can provide a snapshot in valuation. Real estate, investments and liens can all help show what your business is worth.
  • Market: Comparing apples to apples will also give you an idea. Finding the sale price of a business that operates with a similar service, geographic area and process can show what your business might get when it’s up for sale.

While these three broad categories make up the most common ways to find value, the systems can be broken down or combined for more accurate readings. It’s important to look at how your business operates and what holdings you have to determine the best way for valuation.

Finding the right number for your business could be a large undertaking, but it’s crucial for a fair split when selling is your best option. Make sure you know what goes into each formula, and you may find the best way forward.