Dividing the Family Business: Business Valuations in Divorce
In any dissolution of marriage action, a Court can only divide the marital assets and debts after determining the value of the estate and its separate components. Many times, that marital estate may include a family business. In order to determine the value of a business, hiring an expert is necessary in nearly all cases. Divorce is a stressful time, and parties may often overlook the necessity of such valuations due to the cost and time-intensive nature. However, if you fail to hire an expert to value the marital component of a business, it may negatively impact your case and even prejudice your interests permanently.
A business valuation refers to the process utilized by experts to estimate the economic value of a party’s business interest. An individual qualified to conduct a business valuation is an expert in forensic financials and accounting. However, it is essential that your expert has extensive experience in valuing business interests, for the process is not an exact science. The expert will utilize forensic accounting to audit, investigate, and conduct a thorough review of the financial records relating to the business.
There are a number of differing financial methods that an expert may use to estimate the value of a business, and individual financial experts may disagree as to the proper valuation method. In determining such values and approaches, the expert will use his or her discretion and experience, as well as the characteristics of the business itself. Given the benefits and drawbacks of different valuation approaches, it is essential that the expert is familiar with the individual business type and has extensive testimonial experience.
Any party hoping to ensure a fair business valuation will want to first focus on the full and accurate production of records. Both the costs and efficacy of the valuation will largely be determined by the quality of the business records provided. As with any component of the divorce process, an uncooperative spouse can make the business valuation more difficult, costly, or even result in an inaccurate value. A litigant should be sure to utilize the services of counsel to ensure a smooth process and reliable result.
At The Harris Law Firm, our attorneys draw from over 250 years of collective experience to help clients across Colorado navigate the divorce process, including matters of property distribution. To speak with an attorney about your case, call or contact us online.