Business Valuation as Part of Divorce

Divorce is a complex process, and the presence of a business adds an additional layer of difficulty. Whether it’s a small operation or a family-owned enterprise, understanding how a business factors into divorce and property division is essential for achieving a fair outcome. At Barna, Guzy & Steffen, our Minnesota business valuation attorneys provide the guidance you need to protect your financial interests. Call us today at (763) 783-5146 for assistance.

How a Business is Handled in Divorce

Business allocation during divorce varies depending on several factors. While some businesses are subject to property division, others may be excluded. Regardless of the business’s size or type, its presence will significantly influence the division of assets.

The allocation of a business often depends on the involvement of each spouse, such as:

  • One spouse owns the business, and the other is an employee.
  • Both spouses are equal co-owners.
  • One spouse owns the business, and the other works elsewhere.
  • One spouse owns the business, and the other is not employed.

Additional considerations include the timing of the business’s creation (e.g., whether it was established before or during the marriage) and ownership stakes relative to outside shareholders.

Business Valuation in Divorce

Valuing a business is a critical step in property division during divorce. This process typically involves two main components:

  • Determining ownership percentages between the spouses.
  • Assessing the business’s fair market value.

Business Valuation Methods

Accurate valuation should start early in the divorce process. Certified appraisers use various methods to determine a business’s worth, including:

  • Reviewing recent sales and comparing similar businesses.
  • Evaluating tangible assets owned by the business.
  • Analyzing profits, losses, debts, and liabilities.

Thorough financial record examination ensures a complete and precise valuation. While some individuals may consult their personal accountant, certified appraisers bring expertise that ensures the appraisal is reliable for property division and divorce settlements.

Frequently Asked Questions

What is business valuation in a divorce?

Business valuation is the process of determining the fair market value of a business owned by one or both spouses. It plays a crucial role in dividing assets during a divorce.

How is a business valued in divorce?

Businesses are valued using various approaches, including:

  • Analyzing financial records.
  • Comparing similar business sales.
  • Evaluating tangible assets, liabilities, and future earning potential.

What factors affect business valuation during a divorce?

Key factors include:

  • The type of business and its industry.
  • Whether the business was established before or during the marriage.
  • The financial health of the business, including profits, losses, debts, and assets.
  • Each spouse’s involvement in the business.
  • Ownership structure and outside shareholders.

How does the court allocate business assets in divorce?

The marital portion of a business is typically divided equitably. However, the court considers the marriage’s length, each spouse’s contributions, and other factors to determine whether the non-owner spouse is entitled to a portion of its value.

Can the value of a business change during a divorce?

Yes, a business’s value can fluctuate due to profits, losses, market conditions, or economic factors during divorce proceedings.

How do I determine if a business is marital or nonmarital property?

A business owned before marriage or started with non-marital assets may be considered non-marital property. However, if both spouses contributed to the business during the marriage, or if the business increased in value during the marriage, some (or all) of the business might be classified as marital property. Courts assess the business’s history, contributions, and ownership to make this determination.

Why is a business valuation expert necessary?

Certified business valuation experts provide unbiased, comprehensive appraisals that account for all relevant factors. Their assessments ensure the valuation holds up during divorce proceedings and supports a fair asset division.

Contact Barna, Guzy & Steffen Today

If you need assistance with business valuation in divorce, our experienced attorneys are here to help. Call (763) 783-5146 today to schedule a consultation with a trusted Minnesota business valuation lawyer at Barna, Guzy & Steffen.