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Business valuation is often a challenging concern of modern divorce

Those preparing for a complex divorce typically have numerous property division matters to resolve with their spouse. Higher-value assets can very easily lead to more intense disputes and more challenges when settling property division matters.

Few assets are more complex and difficult to address than business holdings. Whether someone started a small business with their spouse, developed a professional practice after finishing graduate school or invested marital income into a business they inherited from their parents, their ownership stake in that company could be at risk when they divorce.

In order to properly settle asset division matters, people need to determine what their marital assets are worth. Establishing a reasonable business valuation can be a very challenging element of a divorce for a business owner.

Why is business valuation so difficult?

Some assets are easy to value. People can refer to specialized websites to estimate what a vehicle is worth. Financial accounts are very easy to value because they have a balance. Businesses are much harder to value because of how complex of an asset they are. A business can own a variety of different resources, from real estate to machinery. It may also own the rights to intellectual property. Even the goodwill an organization has developed with the local community can affect what the organization is actually worth.

Depending on the type of organization someone runs and the assets that it currently owns, as well as the operating costs and obligations it has, there are many different business valuation models that can help estimate a fair market value for the company. Spouses may disagree about which valuation model to use when putting together an inventory of marital assets. If the business owner produces an inventory with a value already included, their spouse might take issue with what they claim the company is worth. In some cases, each spouse may have a professional evaluation performed, which can lead to very complicated property division negotiations or court proceedings.

Compromising when setting a value for the business helps pave the way to an appropriate property division settlement when someone who has invested marital resources in a business decides to divorce. Those who address their highest-value resources appropriately set themselves up to rebuild a better life after the end of a marriage.