If you are a business owner facing a divorce, you’ve more than likely thought about how your business might be valued at as you work to divide assets with your former spouse. While it’s fairly straightforward to set the worth of a car or a house, setting a business’ value is tougher to pinpoint.
Often, in high-asset divorces, both you and your spouse may hire an expert to make a business valuation and provide a record to the court how the expert came up with that dollar amount.
Here are some of the factors that determine your business’ value:
- Business assets and liabilities. This includes tanglible items, such as inventory, savings and equipment, but also intangible factors. Intangibles can include your business’ reputation, patents and trademarks, or software developments. Business liabilities are any outstanding loans, business payroll or other money owed for goods and services.
- Business income. What revenue does the business generate? How does that compare with operations costs? Any net profit will count toward the business’ overall value.
- Date of valuation. Sometimes, divorce proceedings can drag on and a business valuation completed early on isn’t accurate toward the end. Having your business valued close to the end of divorce gives a more accurate look at your business’ worth.
Minnesota is an equitable distribution state for divorce, meaning the court evaluates how long a couple has been married, how much the business’ assets have grown through those years, if one became a stay-at-home parent to allow the other to grow the business, if either was married before and more. Then each person in the divorce is given an equitable share of assets—most often not splitting assets 50-50.
For business owners, consulting a divorce attorney is essential before filing for divorce. You’ll want to develop a strategy to best protect your business assets as you move forward.