One of the main components of any divorce case is the equitable division of property, i.e., the assets and liabilities of the parties. The property is classified as either separate or marital property, assigned a value, then allocated to one spouse or the other. The value of the property is usually the fair market value as of the date of separation. Some types of property, such as bank accounts or some retirement accounts, are simple to value, while others, for example, a business interest, are more complex.
Presuming that the business is a martial asset, the parties should hire independent qualified experts, such as a certified professional accountant (CPA) with an Accredited Business Valuation credential, to perform research and provide a reliable business valuation report. There are three primary methods to determine the value of a business interest: asset approach, market approach, and income approach. Please read below for a general overview of each method:
- Asset Approach– The primary focus centers on the fair market value of the tangible and intangible (goodwill) business assets and liabilities.
- Market Approach– The analysis concerns researching and investigating the fair market value of similar businesses to the subject business. Comparative information generally involves market studies of recent sales of closely-held companies of similar size and industry.
- Income Approach– This method contemplates a retrospective analysis of the business by reviewing income generated over a specific period of time.
If you are a business owner considering a divorce, it is essential that you consult with an experienced family law attorney who will protect your business interest. Simpson Legal Group’s attorneys have achieved favorable outcomes in several complex divorce cases involving multi-million dollar businesses. Please contact us by at (712)256-9899, for all of your legal needs.