The importance of determining value of a business during divorce

On Behalf of | Oct 27, 2022 | Asset Division

The business you started and built took a great amount of time, attention and money. As it turned out, this success came at the expense of your marriage. Your spouse wants a divorce.

As you head in the direction toward ending your marriage, you wonder what will happen to your company and whether you can continue to operate it or be forced to sell. Such a development only stresses the importance of knowing how much your company is worth.

Look at five years in the past and future

Unlike most marital assets such as homes and retirement accounts – whose values are more easily determined, your business and determining its value will take some time. Yes, it will prove challenging, but with the right research, you can do it.

For starters, analyze the past five years of the business’s income along with the value of its assets. Doing so will allow you to spot tendencies such as dips and rises in income. At the same time, carefully review your company’s five-year business projections.

Determine assets and liabilities

From there, you must dig deeper into the following:

  • Assets of the company: This should not be difficult for a hands-on business owner who understands the importance of details. Tangible and intangible property must get attention. The former includes inventory, equipment, computer equipment, furniture, vehicles and bank accounts. The latter may include licensing agreements, software, patents, trademarks, trade secrets and relationships with clients.
  • Liabilities of the company: Weighing down your assets are liabilities that accumulate while running your business. This list may include employee payroll, payroll taxes, outstanding loans, mortgages and accrued expenses such as bonuses and utility bills.
  • Business income: This segment includes receivables for goods and services along with investment income and profits from selling certain company assets. By subtracting business operating costs such as employee salaries and advertising from the company’s income, you determine the profit.

Once you have determined the value of your company, keep in mind the date that you did this. The main reason is that a divorce may take a long time. By the time the divorce is finalized, the value you determined may no longer be accurate.

Help from an attorney

Taking these steps may help determine the most accurate value of your company. Whether you keep or sell your company is up to you, but a skilled attorney can help as you move toward a new life direction without a spouse.