Business Valuations

A divorcing couple that owns business interests may need valuations of those interests to resolve questions or disputes over property division in their divorce case. When you or your spouse own business interests that you must divide in divorce, turn to an experienced divorce lawyer from Carpenter Family Law to walk you through valuing those interests. Contact our firm today for an initial case evaluation to learn more about determining business valuations in a divorce case and discuss how our firm can assist you with protecting your financial interests.

Understanding Business Valuations

A business valuation seeks to place a company’s fair market value, or a price you would pay to buy that business. Business valuations serve many roles, including determining the economic value of an owner’s or partner’s interest in the business. You may derive business valuations in various ways. However, valuing a business usually involves financial professionals with expertise in estimating a company’s fair market value based on its financial data and various generally accepted valuation methodologies.

When you or your spouse own business interests, you must establish valuations for those interests to resolve various economic matters in your divorce case.

Common Business Valuation Methods

Business valuation experts use various valuation methods to determine a company’s fair market value based on those methods and the company’s financial information. Valuation experts may choose one valuation method over another based on factors such as the company’s industry or line of business and its current growth stage. Some of the most commonly used business valuation methods include:

Asset-Based Approach – Under the asset-based approach, a company’s value is determined by subtracting its total liabilities from its total assets as listed on the company’s financials. The approach assigns a company value based on the net value of its assets. The approach works best for holding companies or asset-heavy businesses that primarily derive their value from the assets they own.
Income-Based Approach – The income-based approach assigns a business value based on a company’s future cash flows discounted to present value. The approach works best for a business that derives its value from generating revenue for its owners and has a steady, predictable flow of income.
Market-Based Approach – The market-based approach values a business by using the prices assigned to similar companies that have recently undergone transactions that placed a fixed value on the company, such as a sale or an investment round. However, some of the limitations of the market-based approach include accounting for the differences between the company you wish to value and the comparator companies used to derive the market value and the potential lack of comparator sales for highly unique businesses.

When Might You Need a Business Valuation for a Divorce?

In a divorce, you may need to determine the value of your or your spouse’s ownership in a business. This can be tricky depending on how the business is set up and if there are multiple owners. Determining the value of the business interest can help you, your spouse, and the court determine the economic value to distribute to the other spouse. A business valuation can also help resolve other financial issues in a divorce, such as spousal or child support, which can depend on you and your ex-spouse’s respective assets and income.

How Business Valuations Affect Divorce Settlements

When you pursue a settlement to obtain a dissolution rather than going through divorce litigation, a business valuation can help you and your spouse negotiate a settlement. With a business valuation, you and your legal counsel can determine the portion of your spouse’s business interests attributable to marital property and, therefore, divisible in the divorce.

Once you agree to the portion of a spouse’s business interest that qualifies as marital property and the percentage of that portion distributable to the other spouse, knowing the business valuation can help you negotiate a settlement that avoids having a spouse give up some of their stock or units to the other spouse. Instead, you may keep your business interests by offsetting the part of the business interest distributable to the other spouse with other marital property, such as cash, investments, or real estate. If you co-own a business together, a valuation can help you negotiate a buy-out agreement where one spouse buys out the other’s interest to continue running the business.

Challenges of Valuing a Business During Divorce

Some of the challenges that you could face when conducting a business valuation during divorce include:

Lack of transparency or inadequate financial disclosures from the owner spouse, which can make it challenging for business valuation experts to determine a reliable value for the spouse’s business interests
Commingling of personal and business expenses, which may distort the experts’ analysis of business value
Fluctuating revenue or seasonal operations, which may preclude using the income-based approach to valuation
Assigning goodwill to the business versus you as the owner, as the company’s goodwill may derive solely or primarily from your business relationship rather than customers or clients having goodwill towards the business as an independent entity
Disputes over income potential, especially for growing businesses

How Our Firm Can Help You with Business Valuation Issues

A high-asset divorce attorney from Carpenter Family Law can guide you through the complex factual and legal issues surrounding business valuation during property division by:

Handling the process of gathering financial information needed for business valuation, including using the discovery process to collect information through interrogatories, subpoenas, or depositions
Working with qualified business valuation litigation experts to obtain valuation opinions that you can use in settlement negotiations or during divorce litigation.
Evaluating legal options and solutions for challenges regarding businesses that may arise during equitable distribution, such as dealing with tax implications or legal restrictions on ownership interest transfers
Advocating for your rights and financial interests in court when you must pursue litigation to resolve business valuation and division questions

Why Choose Carpenter Family Law?

Valuing your or your spouse’s business during your divorce can involve complex issues. Having an experienced attorney representing you can best protect your financial interests. Turn to Carpenter Family Law to guide you through the business valuation process in your divorce case because:

Our legal team has over 20 years of experience representing clients in complex legal matters. Our firm works tirelessly to provide every client the top-quality representation and service they deserve.
Before founding Carpenter Family Law, Kendra worked in business litigation for a nationally recognized law firm, where she developed unique insights that now help her advocate for her client’s interests in divorce matters like business valuation. It’s that experience that sets our firm apart from the rest.
When you choose us to help you with business valuation in a divorce case, you can expect us to provide one-on-one attention to get to know you and understand your concerns, goals, and needs. We will take the time needed to develop tailored legal strategies and solutions for your specific interests.

Contact Our Firm Today for Experienced Guidance and Advocacy

When you need help obtaining a business valuation to divide your or your spouse’s business interests in divorce, let Carpenter Family Law help. Contact us today for a free initial consultation with an Ohio divorce attorney to learn more about business valuations in divorce.