Family, Criminal & Children's Court Attorneys Since 1991

The importance of business valuation in a divorce

On Behalf of | Mar 1, 2022 | Property Division |

For many Wisconsin couples whose marriages are ending, the division of marital property is the most contentious issue, especially when the spouses have accumulated considerable wealth. If either spouse owns a business, that asset is often the most valuable property, even more so than the primary residence, so proper valuation is essential.

Why is business valuation necessary?

If you own the business, you may be tempted to negotiate its value yourself in property division negotiations. After all, you run the company and know your income and expenses, etc. However, when working with your spouse in divorce negotiations, the process can become messy. Getting a neutral third party to determine a fair value removes bias and digs into intricate and complex details about the business.

A neutral business evaluator will use one of several approaches to value the business as well as a fair valuation date. Common approaches include:

-Market approach

-Income approach

-Asset approach

Obtaining a valuation early in the negotiation process is essential. Work with your appraiser to determine the most equitable date. Getting the valuation early in the process can help make negotiations smoother. Also, ensure that you understand the standard used.

What happens if we can’t reach a solution regarding the business?

Sometimes, even a third-party appraisal will not allow you and your spouse to reach an agreement. In such cases, the courts will require you to go through additional valuations on equipment, land, or buildings as part of divorce negotiations.

Involving a mediator may be the answer for some contentious situations, especially if your spouse is holding back information. Because divorce cases can quickly become complicated, it’s in your best interests to work with neutral parties who can see through and evaluate all issues.