How do I determine how much my business is worth when divorcing?

On Behalf of | Oct 31, 2022 | Business Valuation

You have spent decades building your business, weathering the down markets but successfully capitalizing when market conditions were favorable.  However, now that your spouse decided to pursue a divorce, you wonder whether your company is at risk.

The court will consider the value of your company nuanced by the date the company was started and whether your personal efforts, during the marriage, enhanced the value of your business.  If your business was started after the marriage, it is, under most circumstances, entirely marital.  The court will value the business and include that value among all marital assets.  However, if you started the business before the marriage the value of the business, as of the date of the marriage, is nonmarital.  Generally speaking, a spouse has no right to that value.  Nevertheless, that can be complicated by your marital efforts during the marriage that enhanced the business’ value.  That increase in  value may be marital.  You are rightfully concerned about losing a portion of the value of your business. This is why it is crucial to know the value of your company as you head down the divorce path.

An accurate valuation is crucial

It is crucial to ascertain an accurate value to your business. While the value of many marital assets – such as homes and 401k accounts — are not difficult to determine, others such as your business will prove more challenging and more expensive to value.

So, how will you determine how much your business is worth?

Talk to your corporate attorney, your accountant and your divorce attorney.  Your company may have been valued in the past.  The more recent the valuation the more useful it is for the divorce.  However, the Court in Maryland requires that the valuation date be as close as possible to the date of divorce.  Therefore, an aged value will need to be updated.  Moreover, if you don’t already have one, the value as of the date of marriage (assuming the company had value at that time) must be determined.

If no valuation has been done, obtain the name(s) of valuation experts from your corporate or divorce attorney or your accountant and arrange to meet with them sooner rather than later.  They will need a host of business records and will meet with you to gather as much information about the company as they can.

A skilled attorney can help

Understandably, the valuation process can be difficult and confusing for a nonprofessional.  An added challenge is the ability to then explain your company’s value to a judge, whose decision determines just how much of the marital value, if any, must a shared with your estranged spouse. An experienced family law attorney working in conjunction with your corporate attorney and accountant can help you determine the value of your company and advocate for you at every step.