When couples marry, they normally begin to slowly combine their efforts into a single, unified and shared mission. This is especially true of married couples who start family businesses and then operate those companies together. These so-called “closely held” businesses are the source of many hotly contested battles during high-asset divorces.
Keeping any business running and profitable is not easy. Married couples who work together and run family businesses often spend countless hours sculpting and building their businesses over many years. Because of the hard work and effort those couples put into their businesses, they sometimes find it difficult to get an approximate “real world” value of their split in a divorce. In other words, their understanding of how valuable their business is may not necessarily correspond with actual industry standards.
In situations like that is where divorce attorneys with experience in high-asset divorces can prove invaluable. Your attorney will often incorporate the use of financial experts during your divorce. Many business and financial experts use the Internal Revenue Service’s metrics when appraising valuation. The following are some of the factors those experts may consider when determining the value of your family- owned business.
–The experts will look at your businesses earning capacity. Very simply, how much profit is the business generating over the course of a specific period of time?
–Experts may also look at the market prices of similar businesses and their stock.
–There are also other intangible things that may also affect the value of your business. For example, is your business well-liked within your community? Naturally, a business that has not developed a sense of goodwill within its community will not be as valuable as those that have succeeded at garnering a good reputation.
Of course, this is not an exhaustive list of how to determine your company’s value. A consultation with your high asset divorce attorney can help you figure out exactly what you should ask for in your complex divorce.
Source: Internal Revenue Service, “Factors for Determining Value,” accessed March. 26, 2015