Separating intertwined assets is rarely simple in a divorce, but dividing a business can reach another level of complication. It’s hard to put a price tag on a company with complicated spreadsheets, but experts are ready to take a crack at it with a few tried-and-true methods.
Married couples own 3.7 million small businesses across the U.S., and that co-ownership can mean difficulties in the event of a divorce. Splitting assets typically begins with finding out their worth, and your business is no different.
A valued opinion
The courts will be looking for the fair market value of your business to use when dividing assets, and they often want to hear the number from a qualified professional. An accredited or certified appraiser can use several systems to determine where they should place the value.
Accounting for businesses
- Asset: Very simply put, subtracting liabilities from the measure of holdings can get you an asset value. This model works well for companies that don’t have many intangible properties. It also has a bit more flexibility than merely looking at a balance sheet, because markets for materials and products can change over time.
- Market: Another method takes a look at the pricing of similar companies. Sales and valuations of comparable entities can show where the business would sit on the market, after taking into consideration things like debts owed and outstanding.
- Income: Appraisers can decide on a number by looking at trends in revenue, and well-established enterprises will have a history that you can use to predict future earnings. The income approach uses this data to find the value in how much a company is bringing in, and will continue to make going forward.
However the division takes place, it all starts with the price tag. Understanding how the courts generally want a business valued is an essential step to making sure you get the assets you deserve.