Determining the Value of Your Family-owned Business

If assets of your Florida divorce include a business, expect a formal valuation during the proceedings. The perception is that if a family-owned business is part of the settlement decision, the process gets very expensive, and it drags on too long. Although this can happen, it doesn’t have to. We often represent divorcing clients whose business is part of their marital property.

According to CRI CPAs and Advisors, a business valuation by an unbiased third-party can help smooth the divorce process.

Defining marital property

The goals of a divorce settlement include equitable distribution of property. This means that the court classifies assets and liabilities as marital property or separate, then distributes the marital property between you and your ex. Determining some assets’ fair market value, such as a bank account or home, is a relatively simple process. However, there are several factors involved when establishing whether a business interest is marital or separate property.

The first consideration is whether you or your spouse had the business before or after the marriage date. Another factor is who provided startup funding, regardless of the founding date. The third point involves looking at who contributed what during the marriage. This includes labor-related contributions as well as financing.

Establishing business value

In the event a business interest is small and straightforward, attorneys may agree upon a value. However, this is not a typical scenario. Experienced financial experts generally must dig into the company’s history and take a detailed look at the assets, liabilities, and other aspects of the business before determining value.

If the company has a high monetary value, your complex divorce may include a team of “experts” on your side and a team working with your spouse. Experts may consist of tax professionals and forensic accountants. They may testify in court regarding the method they used when determining value. If you end up in litigation, the judge will decide which experts are most credible.

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