Why you must have a business valuation performed pre-divorce

On Behalf of | Sep 22, 2021 | property division | 0 comments

One of the biggest fears that spouses have when they find out that they’d headed for divorce is losing their valuable assets like their home, cars, collectibles, investment portfolio or their family business to their spouse. This is a particularly pressing matter that often weighs on the minds of divorcing spouses that haven’t been as involved in their household’s finances as others. 

Kentucky subscribes to the equitable distribution doctrine as it relates to property division in a divorce. This means that the judge will expect any property division settlement to be fairly divided before they sign off on any agreement. How might you determine what is a fair division of assets, such as a family business, if you don’t know its value?

Approaches for determining a company’s value

There are multiple strategies that an appraiser can use to determine a company’s value. It’s most likely that an appraiser will ask you and your business partner (your spouse) for your future plans for the company if you’re looking to divorce. Many spouses choose between one of several different options when deciding what to do with their business. These include:

  • Setting aside their personal differences and continue to run the company as business partners
  • One spouse may sell their stake in the family business to their husband or wife, allowing for their unilateral running of it
  • Coming to a mutual decision to relinquish ownership of the business to an investor or buyer

Appraisals tend to come in the highest when the appraiser performs the assessment in preparation for you selling the company to an investor. In these instances, appraisers may not only take into account the value of your office building but also any furniture, technology and intellectual property rights it might have. The appraisal may also account for intangible yet valuable factors such as your company’s reputation and community trust, as well as industry forecasts. 

What role does a business appraisal play in divorce negotiations?

Divorce is a transition for every couple. The prospect of having to cover your bills and lifestyle on one income can be daunting. The best thing you can do to preserve your financial future is to negotiate a division of your family business based on an accurate valuation.