I'm sure you're thinking at this point that the divorce process does not seem as simple as you originally thought, and typically if it involves a business valuation and or more complicated financial issues , then you could be correct. There are other options to getting divorced depending upon your situation , your relationship with your spouse , your communication history with your spouse , or even depending upon your financial situation.
Read MoreWell, most of the time both people will hire an attorney and an expert to testify to the value of the business and potentially develop alimony and child support scenarios for the court. Unfortunately, many times this results in one expert value in the business really high and another expert value in the business really low. This is because there are times when the judge, we'll see 2 experts who have extensive backgrounds and who appear to know what they're doing or maybe it's just a really complicated business, and the judge believes that both experts have reasonable values.
Read MoreOne of the ways a valuation expert may also get involved in a divorce is in the calculations of maintenance or alimony and child support. The expert will review the personal tax returns and business information in order to determine the income available to the couple. They are looking at what each person has made in the form of salary, W-2 wages, consulting agreements, or income from various business interests. Typically the expert will review 3 to 5 years of information and see if there are any trends or patterns.
Read MoreThere are a couple ways that you can protect your assets or investments that you owned before you got married. Most of the ways involve some planning prior to marriage. Pre nuptial agreements are one way to clearly establish how things get separated if you get divorced. Many times people will not necessarily want to do these at the beginning or before the wedding, so a post nuptial agreement is done during the marriage. But will both parties agree to the stipulation
Read MoreThere are many times when a business owner has owned a business for several years prior to the marriage. So we talk about these issues as the difference between separate property and marital property. Separate property was owned prior to the marriage and an expert might come in and “trace” the assets to determine if they are still separate or have been co-mingled or turned into marital property.
Read MoreAlmost all business owners think that the business would be worth nothing without them. Maybe the business owner is the primary sales person or driver of the business, or maybe they have all the relationships with all of the clients, or maybe they have special training or a proprietary process that makes them unique. I think most business valuation people understand that the business is heavily reliant upon the main owner, especially in small businesses, but that usually does not mean that the business is worth nothing if the owner steps aside.
Read MoreI have seen times where a judge will allow a divorcing couple to continue to own the business, but usually that is because both people are highly involved in the company and they request to stay owners. Even then, it is a sticky situation for the judge. Typically, the courts want to see one person maintain the business and the other person no longer in the business.
Read MoreTypically we recommend you continue to run your business in the same manner as you did prior to the divorce and not to make any decisions that you think will make the value lower (or higher) or do things that you think are more advantageous in the divorce litigation. Here's the thing - most of the time if you decide to do something different in order to increase debt or reduce your profit which you think will help you, it could potentially backfire on you.
Read MoreMost people will want to do some pre-divorce planning or at a minimum know what the business is worth before they even decide whether to get divorced. Typically the business owner will reach out to a valuation expert and say “I want to try to get a valuation number because I'm doing some strategic planning” or “I just want to know what the business is worth for internal purposes”.
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If your company can continue to operate without you, if you are on vacation for two weeks, with no internet or phone access then you have probably created a sustainable business model. And that is what buyers are looking for - business models that are not reliant upon one owner and are transferable
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People want to get divorced in a way that preserves their wealth, provides a nice lifestyle for two separate households and maybe even protects their kids. If you want to have a bit more control over your future and not leave it up to a judge, you have options.
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Most people are not sure, so whether you hire an attorney or work with a mediator, or even decide to do collaborative divorce, the first documents you will need to create with your attorney or a financial expert will be the statement of property and the statement of income and expenses.
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Some financial consultants will specialize in valuation services when the divorcing parties own any marital or separate businesses. They can also analyze the various assets owned by the parties, such as houses, retirement plans, pensions, stock options and show different settlement scenarios.
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Understanding whether you need a valuation has to do with several factors, some of them are about the business and some of the factors are about the strategy for testimony regarding valuation and maintenance issues.
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Most of the difference lies in the details of the financials. Many small businesses do not prepare monthly financial statements and may not even have professionally prepared tax returns.
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Some financial consultants will specialize in valuation services when the divorcing parties own any marital or separate businesses. They can also analyze the various assets owned by the parties, such as houses, retirement plans, pensions, stock options and show different settlement scenarios.
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Some simple questions you can ask your client are in reference to profitability, is the company making money or profitable? Has the revenue stayed the same as the past couple years or is it significantly different, either up or down? Does the owner receive a salary from the company or possibly distributions? You can also ask whether the company is a start-up or if there are any trademarks, patents or proprietary systems.
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One of the purposes of calculating EBITDA is to get to a cash flow number which can be compared to others in your industry. It is also a number which a buyer would expect to earn from the company after the sale.
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Strategically you may want a valuation if the other party has already hired an expert, or if there is any concern about whether a business asset is marital or separate, or if there are several companies involved and the business structure is complicated.
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Many personal injury attorneys and lawyers want to know: How can we determine wage loss calculations in order to settle personal injury claims?
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