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 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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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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Business Valuation Purpose: What is Valuation or Evaluation? Why does the company value change depending on the valuation PURPOSE? Are you looking to understand how to value a company?
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What is Fair Market Value? Fair market value as a term has many meanings. As a term in business valuation it has a specific meaning.
If you own a business and are getting divorced you may consider your current CPA to value your business. Here are some questions to ask!
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The income approach considers historical income, future revenues of a company, the earning potential and also capital requirements, or how much will be needed to invest in the building and equipment to support future revenue growth.
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There are some common questions business owners ask about valuation discounts when getting an appraisal of their company. What is the discount for lack of marketability?
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What happens when you own a company and you file divorce papers? Well the first step is to contact an attorney who you trust to handle your case.
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