Somerville Office
Judge's gavel and dollar banknotes on income tax form background

Equitable Distribution of a Business

If you are living the life of an entrepreneur, you are no stranger to working long hours or having to spend too much time away from home to ensure everything runs smoothly. If you started the business with your spouse, you both likely contributed a fair amount of blood, sweat, and tears. Unfortunately, if your marriage is coming to an end, you will encounter some unique challenges as you embark on the process of equitably distributing the business. Property and asset division is a complex enough task, so if you own a business and are going through a divorce, make sure you obtain skilled legal counsel.

How Does it Work?

Most assets, such as a home or a car, are relatively easy to value. A business, however, is substantially more difficult to evaluate. Moreover, even if one spouse is not an owner, it does not mean he or she is not entitled to a portion of the business.

When determining the value of a business, there are a few different ways to go about obtaining a fair calculation:

  • The asset approach: Your business’s value can be determined by calculating the sum of all assets and subtracting the liabilities from that total. Anything tangible, including inventory and infrastructure, will factor into the sum of all assets. However, this method does not consider unrecorded liabilities or assets, which can create some complications.
  • The market approach: Your business’s value can be determined by comparing it to a similar business that was sold, much like what an appraiser would do in valuing a home. If a business comparable to yours was not recently sold, however, this approach will not work.
  • The income approach: Your business’s value can be determined by gathering historical information and formulas to predict its profits and expected cash flow. It will also factor in the rate of risk or return.

A business evaluation may require retaining a forensic expert to evaluate the business. Because of the expense associated with obtaining a business evaluation, people often jointly retain an expert.

Discuss Your Case with a Knowledgeable Divorce Attorney Today!

If you are going through a divorce and own a business, reach out to the knowledgeable family law team at Lane & Lane, LLC. Our attorneys have more than 60 years of combined legal experience and a commitment to ensuring our clients’ goals are met. Dividing a business is a complex matter that requires skilled legal guidance, so do not hesitate to obtain the assistance you need.

Contact us today at (908) 259-6673 to schedule a consultation.

Categories