Going through divorce as a business owner can certainly make things more complicated when it comes to asset division. In some cases, the business counts as a marital asset, so your ex may have a claim to a portion of the company’s value based on their contributions or how much the business has grown. In other cases, spouses will actually be joint business owners, so they need to split up shared ownership rights.
In this situation, one of the most important things to do is to get a correct business valuation to determine exactly what the company is worth. You can then proceed with property division using this number as a benchmark. Below are some tactics that may be used during the valuation.
Assets and liabilities
First of all, one tactic can be to look at the assets the business owns and the liabilities or debts that it owes. You subtract the cost of these debts from the value of the assets—real estate, inventory, machines, intellectual property, etc.—to determine the value.
Predicting future earnings
Another component may be looking at what the business has earned in the past. This can often lead to projections or predictions about how that company will grow and what it is likely to earn moving forward.
Considering stock prices
Small businesses are not traded publicly, so there are not any shares owned by other investors. But for large companies that are publicly owned, one tactic is often to multiply the value of a single share by the total amount of shares that exist. This gives an overall valuation of the company if one person owned all of the shares.
It may be necessary to use multiple tactics to do an appropriate valuation. Couples going through a divorce as business owners need to carefully consider their legal options.