6 Things You Should Know About a Business Valuation in a Divorce Case
1. Where there’s a business, there’s valuation.
If a business is owned, you can expect a valuation in the event of a divorce. In the state of California, it will be required as an essential part of the case.
2. Past and future are factored in the situation.
The estimated future income from a business plays a part just as much as the past income does. These calculations take into account recessions (such as the Great Recession of 2008) when businesses were likely not doing as well, and assess how the company will do in the future under different circumstances.
3. More knowledge is best.
Some parties involved in the divorce may feel that a business valuation may put them at some disadvantage or that they might get a bad deal at the hands of the opposing attorney. It’s a fact, however, that everyone comes out more satisfied when there are valuations done. Both parties are cut fair deals when research is conducted, and having complete knowledge and understanding of assets on both sides is the best way to reach said fair deals. The agreement will be more straightforward once both sides of the divorce feel that they have all the information.
4. The is a difference between separate and marital funds.
The division of business assets depends significantly on whether or not the company was acquired before or after marriage. When two people get married, their funds become joined, and therefore become “marital funds.” If a company was started on marital funds, then it should be divided equally between both spouses. If the business was started on “separate funds,” or those funds which each spouse held before they were joined, then that will be taken heavily into consideration and will be divided appropriately. This decision is a simplified explanation of the difference between these two types of funds, so consult your attorney for more detailed information.
5. The simpler the valuation, the less legal fees you pay.
If you and your spouse go to war over who deserves more when dividing assets, it would only cost you more in both money and stress. The surest way to get both of you more money is to help by being open to negotiation.
6. The value of your business is ever-evolving.
It’s possible that, as a business owner, you understand that your business can hold different values yearly or monthly. Since divorce trials can take months, if not years, it is essential that you have your valuation done as close to your trial date as possible. You could pay an expert a large sum of money to assess your business thoroughly, only for that valuation to not hold up in court because it was completed two years ago.
Make sure, before you get into the thick of your divorce case, that you are as knowledgeable as you can be about how the division of assets usually goes in the case of a business. Going into the first meeting with your attorney armed with knowledge is the best way to advocate for yourself. Give us a call to get started.