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Valuing your business could be an essential step in divorce.

On Behalf of | Nov 6, 2020 | Divorce |

You have spent years building your business, and it may be one of your most valuable assets. However, if your marriage ends in divorce, that business can also be one of the most stressful aspects of property division. To ensure that you receive your fair share of your marital property, you need to determine how much your business is worth.

The market value approach compares your business to others that have recently sold.

If your business operates in a competitive market, other similar companies may have sold recently. By comparing your business to those sales, you can estimate your business’s value. While this method establishes a value that is accurate to the current market, it relies on the presence of similar businesses in the same market and may not work for many businesses.

An asset-based approach uses your business’s property to establish its value.

For businesses that hold a great deal of property, those assets can be used to evaluate the business’s worth. While this method can be relatively straightforward, it may not be the best option for particularly profitable businesses because it does not take those profits into account. However, this method may benefit businesses that have made significant investments in unsold inventory or real estate holdings, manufacturers that purchased valuable equipment and companies that hold copyright, patents or other intellectual property.

The income-based approach estimates the value of future profits.

Businesses with consistent profits and companies with fluctuating earnings alike can use their income to estimate value. As Forbes notes, however, this is a particularly complex way of establishing a business’s value because it involves estimating not only your business’s future income but also adjusting that income based on growth rates, taxes and other factors.

By using these methods or a combination of multiple methods, you can establish a realistic value for your business and protect your right to a fair share of your marital property.