How Do You Value a Business During Divorce?

How Do You Value a Business During Divorce?Financial disclosure is a necessary part of the divorce process in the state of Florida. This can be a great deal more complicated than simply providing pay stubs, tax forms, and bank statements – particularly when you own a business. Calculating the value of your business can be a very confusing process, and you must provide the court with a valuation supported by competent, substantial evidence.

Under Florida law, you will be required to make a full disclosure of your finances within 45 of the initial pleadings being served, and it is crucial that you provide the most accurate information you can. If you overvalue your business, and your spouse is awarded half the value that you have provided, it could be a very costly mistake.

There are different methods for determining the value of a business. Generally speaking, the most common method is called the “fair market value” standard. This refers to the sum that you could reasonably expect to receive if you were to sell your business to a willing buyer who has reasonable knowledge of the relevant facts. This refers to a hypothetical sale, so it can be used as a method of valuation even if the business cannot actually be sold.

In Florida, fair market value is the method used to determine the value of a business in a divorce settlement. In order to determine this value, experts – such as forensic accountants – are often brought in to provide assessments.

Determining Fair Market Value: Three Different Approaches

How these assessments are made depends on what approach is being used. There are three common approaches – the “asset approach,” the “market approach, and the “income approach.”

The asset approach involves creating a balance sheet that lists all of the assets and liabilities of the business. This takes into account a wide variety of factors that can affect a business’s value, including property, inventory, cash on hand, and loans. It also takes into account “intangible” assets, such as goodwill.

The market approach involves locating comparable businesses that have recently been sold. By examining the prices that these businesses were sold for, one can estimate the fair market value of the business in question. However, finding comparable businesses is not always easy.

The income approach looks into how much money the business makes, and how much it is expected to make in the future.

Florida courts recognize that different approaches work best for different businesses. If divorcing spouses arrive at significantly different figures when valuing a business, the court will examine the methods that were used to calculate their figures, and determine which approach seems the most reasonable.

Finding an Expert Who Can Help

If you are facing a divorce, and you need to provide a value of your business, it is highly recommended that you contact an attorney. An experienced divorce lawyer will be able to answer your questions about this complicated process, and help you decide what kind of expert advice will be the most helpful to your case.