Sarasota Business Valuation Frequently Asked Questions
The decision to end a marriage is rarely an easy one. If you are going through a divorce, you likely will have many questions. If you or your spouse have a business that may be considered marital property, you may be wondering what will happen to that business upon divorce. The truth is that while business assets can be divided at divorce, determining how much the business is worth must happen first.
The process of business valuation can be tricky. Several different methods can be used to figure out the value of a business. To help our clients understand this process and to answer some of the more commonly asked questions concerning business valuation, Law Offices Of Matthew Z. Martell, P.A. have compiled frequently asked questions and answers concerning business valuation in the context of a divorce. If you have any further questions or would like to speak to one of our attorneys about your divorce, please reach out to us by calling (941) 556-7020 or by contacting us online.
Are Businesses Considered Assets?
Yes. Under Florida law, a business can be considered an asset for the purpose of the distribution of marital property. A business owned by you, or your spouse may be divided or sold upon divorce. Still, just because a business is considered an asset does not mean it will be considered marital property.
Is A Business Considered Marital Property?
It depends. Marital property is anything of value that was acquired during the marriage. A business may be considered marital property if:
- A spouse contributed either financially or supplied labor in the running of the business.
- The value of the business increased during the marriage.
- The business was purchased or formed during the marriage.
- Marital funds were used to improve or run the business.
- The business was acquired with commingled funds.
What Is Business Valuation?
If a business is considered marital property, then the value of the business will need to be determined. Valuation is the process of determining how much a business is worth. There are some methods to figure out how much a business is worth. Courts generally will use the income approach, the cost approach, or the market valuation approach to determine the value of a business.
How Can I Find Out Information About My Spouse’s Business?
If you have filed for divorce, then at some point, your lawyer may request discovery. Discovery is a legal process where your spouse will be ordered by the court to provide information about their finances and assets. If your spouse refuses to comply with the discovery requests, the court may hold them in contempt and issue sanctions.
What Is The Income Approach?
By looking at the business’s expected net income through a certain period and then recalculating the business’s cash flow in terms of today’s dollar value, the business’s current value can be determined. There are a few ways to use the income approach, and this method is often used to determine the value of professional practices like a doctor’s office or an accounting firm.
What Is The Market Valuation Approach?
This approach uses comparative data to come up with the value of the business. Market valuation looks at the current market to determine how much a willing buyer would pay for the business on the open market. In many cases, similar comparable businesses sold recently will be considered to estimate how much the business could fetch if placed on the current open market.
What Is The Cost Approach?
This approach involves totaling the business’s assets and then deducting its liabilities. This method suits some businesses better than others. This method does not account for some non-tangible aspects of the business, nor does it consider the potential of the business’s profitability if it were operated at maximum efficiency.
What Happens After Business Valuation?
If the business has been determined to be marital property and there is no disagreement concerning the value of the business, then the business can either be sold, bought out by one of the spouses, or continued to be co-owned by the spouses. Mediation is an option to determine what will be done with the business after valuation.
What If I Disagree With The Valuation?
If you disagree with the valuation or the method used to attain the valuation, then you may be able to present your valuation of the business and negotiate about it during mediation. If an agreement cannot be reached through mediation, then you will likely need to litigate the matter in court and have a judge decide.
Can I Hire A Forensic Accountant To Conduct A Business Valuation?
Yes. Forensic accountants are often used to determine the value of an individual or business’s assets and overall financial worth. The forensic accountant’s findings may also be used in court if the divorce cannot be resolved through agreement. You may also be able to present the forensic accountant’s findings in mediation if you choose to mediate.
Sarasota Divorce Attorneys
The experienced Sarasota divorce lawyers at Law Offices Of Matthew Z. Martell, P.A. have handled divorces involving business assets and business valuations. We understand how important business valuation is in the property distribution process, and we will aggressively pursue your interest. Whether you are looking to protect your business or seeking a fair and equitable distribution of the marital estate, our lawyers are here to help you obtain the most favorable outcome in your divorce. For a consultation, reach out to us today by calling (941) 556-7020 or by contacting us online. We look forward to speaking with you.