Easing The Stress Of Your Family Law Matter

Business valuation is critical in a contentious divorce

On Behalf of | Apr 26, 2019 | Family Businesses

Going through a divorce when you own a business adds another level of difficulty to an already challenging situation. You have to think about the property division process as it relates to your personal affairs, but you also have to consider the business that you worked so hard to build.

The fate of the business is set already if you addressed it in a prenuptial agreement. If this is the case, you need to review that agreement to find out what is going to happen.

In the absence of a prenuptial agreement, there are some major things for you to find out that can have a direct impact on what happens to the company. One of these is the value of the business. Getting a business valuation is necessary to determine this.

There are two distinct standards for determining the value of a business for a divorce. One of these is the fair value and the other is the fair market value. The primary difference between these two is that the fair market value typically includes discounts that are assigned for lack of marketability and lack of control, while the fair value doesn’t have these applied.

Ultimately, the value of the business is what price a buyer would purchase the business for if neither that person nor the seller were being forced to complete the transaction. It considers the state of the company and the potential future of the company.

When there are disagreements about the business, the valuation becomes vitally important because the court will use this to determine what needs to happen. It is imperative that the valuation is considered legally valid and that it meets the state’s standards for this aspect of a business divorce.