When dividing assets, divorce often involves complex state laws. These complications can exacerbate when either partner is a business owner, or, even more complicated, if they own the business together.
When business owners (or people with other business interests) want to fairly divide their company in a divorce, evaluations are necessary. In this article, we explore what it takes to evaluate a business within a divorce.
The Importance of a Business Evaluation During a Divorce
Divorce is often about finding a way to divide assets. In a state like Florida, that means distributing property based on fairness, or equity. Often, the person who bought or paid for marital property isn’t important. What matters is who contributed the most to the property.
Fairness also includes the value of something. If the family has a very expensive home, giving it to one person has a much bigger impact than it would if they lived in a modest house.
That is where a business evaluation comes in handy. Such assessments determine the company's worth and assets. They provide a reliable financial base, which helps you determine how to fairly divide it in a divorce. Spouses who use a business evaluation could avoid misunderstandings and clashes over the asset division.
Assessing the Financial and Non-Financial Elements of a Business
Financial elements could include:
- The company's assets and debts
Non-financial elements might include:
- The business’s reputation
- The company's brand recognition
- The relationships the has with customers and suppliers
Assessing the non-financial elements is much harder to do, and it takes the work of a skilled professional. For instance, determining brand reputation requires scouring social media mentions, online reviews, and so on.
When assessing the value of a business, you need a good attorney by your side. They can help bring in other reputable professionals to help. Russell S. Hershkowitz, L.L.C. has experience handling high asset divorces, so reach out to us to help guide you.
Which Assets to Consider in Your Business Evaluation
- Tax returns
- Financial statements
- Any real estate or property owned by the business
- Tangible assets, including equipment and inventory
- Intangible assets such as intellectual property and reputation
Methods for Conducting a Business Evaluation
These provide a quick, easy way to analyze a company's financial statements and identify areas of strength and weakness.
This method compares a company's performance to that of its peers in the industry. It helps businesses to see how they stack up against their competition and make necessary adjustments.
SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis
This system helps identify internal and external factors that impact the business.
Cash Flow Analysis
This detailed approach helps you understand how money is flowing in and out of the company.
You can combine or tailor any of these methods to meet your needs. Each can help tell you where the company currently stands and provide an educated projection of where it is going.
Once you have decided on a method, establish an appropriate timeline for valuation. This deadline will depend on several factors, including the complexity of the business, the availability of assets, and the financial situation of both parties.
Our firm is here to help guide you through the complexities of a high net worth divorce. We’re here to help you take charge of your future, so contact us for a consultation. You can reach us online or by phone at (407) 753-4111.