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How to Value a Business in a Divorce

Div21

Owning a business is often one of the biggest undertakings in a person’s life, and it is also often one of the most substantial assets for a couple. If a spouse owns a business, or a business interest, and the couple decides to divorce one of the biggest questions is often what the company is worth. Determining the value of a business can massively impact your overall divorce settlement, which is why it is important to hire an experienced Florida divorce attorney who understands how company valuation works. At the Law Offices of David L. Hirschberg, our team is here to help evaluate this and any other significant assets in your divorce case. To learn more, call or contact our office today.

Why Valuation is Important

Properly assessing the value of a business is important to many different aspects of a divorce. First and foremost, it plays a significant role in the distribution of property between spouses. As an equitable distribution state, if the business owner wishes to retain their ownership, it may mean that their spouse retains significant other assets in the divorce. Determining the value of a business, as well as the income derived from it, can also play a substantial factor in the assessment of spousal support and child support in a Florida divorce.

Valuation Methods

There are three main methods for determining the value of a business in a divorce. The asset approach, market approach, and income approach each have their benefits and drawbacks for valuation, and deciding which method to use will be one of the big decisions that you will have to agree upon during a divorce settlement. 

Asset Approach 

The asset approach is the simplest method of valuing a business. Simply take the total assets and subtract the total liabilities to get the company’s worth. This includes tangible and intangible assets, such as infrastructure, technology, inventory, accounts receivable, patents, trade secrets, and anything else that brings value to the business. 

Market Approach 

The market approach uses comparable businesses to determine the value of your company. Similar to the housing market, comps are pulled for businesses in the same industry and of similar size to determine the value of the company. However, this method can be difficult if the business is unique or has no comparable companies in the area to use as benchmarks for value. 

Income Approach

Finally, the income approach uses historical business data and complicated formulas to determine cash flow and estimate profits for the business in the future. This is the most complex method of valuing a business but is also often the truest reflection of a business’ worth.

Call or Contact Us Now

Do you have additional questions about valuing a business in your Florida divorce? If so, the experienced Boca Raton divorce lawyers at the Law Offices of David L. Hirschberg are here to help. Call the office or contact us today to schedule a consultation with one of our experienced Florida divorce lawyers now.

Resource:

investopedia.com/terms/i/income-approach.asp#:~:text=The%20income%20approach%20is%20a,income%20by%20the%20capitalization%20rate.

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