Obtaining a Business Valuation in a High Net Worth Divorce

 Posted on December 12, 2018 in Family Businesses

Dissolving a marriage is complicated and often has the potential of becoming an emotional and difficult process. Those risks tend to be especially high for those who are involved in a high asset divorce and own unique assets, such as a business, as they could be required to sell the company, or buy out their soon to be ex-spouse’s interest, both of which could cause significant financial strain. Obtaining an accurate business valuation is critical to ensuring that any property settlement entered into by a couple is fair, so if you or your spouse own a business and are considering divorce, it is critical to speak with an experienced high asset divorce attorney who can ensure that your assets are properly appraised.

Determining a Company’s Value

Hiring an expert in business appraisals is critical when it comes to placing a value on a company. This type of appraisal is complicated, as it requires a prediction of the potential future value of the company, as well as its past and current value. During this analysis, business appraisers will take a number of factors into account, including the company’s:

• Expenses;
• Earning history;
• Earning capacity;
• Dividend-paying capacity; and
• Stock prices.

Depending on the method of valuation used, an appraiser may also be required to evaluate the price of company equipment and other tangible assets, such as:

• Cash;
• Inventory;
• Accounts receivable;
• Furniture;
• Vehicles; and
• Fixtures.

In addition to these physical assets, businesses also own intangible property, such as trademarks and copyrights, the value of which may also need to be assessed by appraisers. After assigning a value to these assets, conducting a physical review of important properties, and making industry comparisons, appraisers will reach a conclusion regarding a business’s value and explain those findings in a report.

Methods for Valuing Assets

There are a few different approaches that appraisers use when valuing business interests, including the asset approach, the income approach, and the market approach. An asset-based approach involves adding up the value of all tangible and intangible assets, minus any company liabilities. Although this method may seem simple, it usually requires appraisals by a series of separate experts and also comes with the risk of failing to take into account unrecorded assets and debts, such as goodwill.

The income-based approach, on the other hand, determines a business’s value by calculating future benefit streams, which involves collecting and reviewing historical financial data and then making adjustments to account for operational costs.

Finally, the market approach determines a company’s value by comparing it to similar businesses that were recently sold. Unfortunately, this method is often difficult to use, as there are usually great differences in the size, profits, sales, and geographic location of two companies, even if they are relatively similar in nature.

Contact a Leander High Asset Divorce Attorney Today

To start working on your own case with an experienced Georgetown high asset divorce attorney, please call 512-610-6199 or complete one of our brief online contact forms and a member of the legal team at Powers and Kerr, PLLC will contact you as soon as possible.

Source:

https://www.investopedia.com/terms/b/business-valuation.asp