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Ascertain your business’s value before divorce negotiations begin

Small business owners contribute greatly to the economy of Virginia. Oftentimes a person or couple with a gem of an idea can develop that idea into a flourishing business. However, just because their business is successful doesn’t mean their marriage will be. When small business owners divorce, they must decide what to do with what may be their largest asset — the business itself.

One option is to allow both spouses to retain an ownership interest in the business. Or, if the spouses are currently co-owners, and one of them no longer wants to stay in the business, that spouse may be bought out by the other spouse. Or, sometimes after a divorce neither spouse wants to keep the business, and may look to sell it.

No matter what option is chosen, if small business owners divorce they will need to complete a number of tasks relating to the business. First, they must ascertain how much their business is worth. This should be done prior to negotiating the divorce. This way, any buyout will be fair to both parties. Moreover, just because its owner is divorcing doesn’t mean the business immediately ceases operations. There are still client’s needs to be served, employees to pay and bills to deal with, among other things.

What is included in a business valuation? Many things. The value of office equipment will be counted as will the office building itself, if it is owned by the business. If there are any additional pieces of real estate, these will be included in the valuation. How much income the business makes annually and how that income is anticipated to increase will be considered.

Unfortunately, sometimes a business owner will try to conceal the business’s true value in order to have the upper hand in the property division process. A business owner may try to conceal profits, falsely misrepresent that the business has incurred more expenses than it truly has or even include more employees than what the business actually has, all in an effort to make the business seem less valuable.

In the end, ascertaining the value of a business is only one step to take prior to the property division process. If a spouse wants assistance in determining how their business will be affected by the divorce process or if they are concerned their spouse is misrepresenting the value of the business, they may want to seek legal advice.

Source: Forbes, “How Divorcing Women Entrepreneurs Can Get What They Deserve,” Kerry Hannon, Nov. 2, 2017

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