The Role Valuation Plays When Dividing up the Business

There are many reasons owners might need to divide up the business. Divorce is one of the most common reasons. Even when couples do not own the business jointly, the business might count as a marital asset. This becomes especially likely if one spouse contributed to the business or made sacrifices that allowed the other spouse to build it.

As the name implies business valuations determine how much money the company might sell for in the market. There are several different ways to handle splitting the business that might make this information necessary.

Buying out the spouse

When one spouse wants to hold on to the business alone, that spouse might choose to buy out the other. CBS News points out that valuing the business becomes necessary here. When couples know how much the business might sell for, they can determine how much to pay the other person.

Note that buying out the person might not always mean paying in cash as some couples find more creative solutions. For instance, say an appraiser values the business at $1,000,000. Selling the house for profit or agreeing to continue to make the mortgage payments and offering a larger portion of the retirement account might balance things out.

Selling the business

Couples might also decide to sell the business and go their separate ways. This still requires a business valuation so they know what the fair selling price is. Some couples prefer to leave this up to potential buyers, but if the business is worth more than they know, this could leave millions on the table.

When couples sell the business, they can then each use their shares to start over in another field. Ideally, they steer clear of establishing competing businesses as this might continue to create friction over the next few years.

Dividing up the business is one of the most difficult decisions people make during a divorce. Attempting to avoid doing this is also one of the reasons business owners remain married to their spouses even when they know the relationship no longer works.

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