Property division can be one of the most complex parts of a divorce. If one or both of you are business owners, then you may need to put a value on the business or businesses, which can complicate things further.
Here are three ways people traditionally use to value a business:
1. Assets minus liabilities
Work out the sum of the assets the company holds. For example, if it is a restaurant, you might have premises, furnishings, hardware, equipment such as fridges and a stock of food and drink. Then you do the same for the liabilities. Perhaps you have bank loans, lines of credit with suppliers and staff bonuses yet to be paid. Subtract the liabilities from the assets and you have a final value of the business.
2. Market value
Much as with houses, you could value a business by comparing it with others that have recently exchanged hands. If you know the restaurant down the road sold for half a million, then you could gauge a rough value for yours. This can sometimes be very difficult though, as you’d need to take so many factors into account, such as size, turnover, location and reputation.
3. Income generation
How much is your business currently turning over? How much do you think it could turn over in the future? Divorcing couples can often disagree heavily over this as there is truly a lot at stake. If you value the business on how it is doing now and it goes on to double its turnover within a few years, the person who gave up the business might feel they got a raw deal.
Every situation is different, so getting help to look at your business in the wider context of your total assets and divorce can help you make appropriate decisions.
