Dividing up a marital estate can be a long and complicated process, particularly if one of the assets includes a privately-owned business.
Some common issues include:
- How much is the business worth?
- Do you need to be concerned about the issue of “double dipping” when considering the valuation of a business and the money spouses owe in support obligations?
- Is the spouse that owns and operates the business being honest when it comes to reporting his or her income?
Tip #1 - How much is the business worth?
There are three primary methods used to value a business: the asset, the market, and income approaches. No matter which approach you use, all of these methods start with a review of the company’s financial statements. However, your investigation shouldn’t end there, especially for a spouse that isn’t involved in the day-to-day business operations.
Valuation experts must be given equal access to financial records and the opportunity to tour the company’s facilities and interview management. Inadequate information can cause an expert to miss critical information and possibly lead to an inaccurate conclusion of value.
If the business was owned before the marriage, it might be appropriate to include only the appreciation in value over the course of the marriage. Estimating appreciation in value requires a comparison of the current value of the business as compared to its value on the date of marriage.
To read Three Tips for a South Dakota Business Owner Going Through a Divorce (Part 2) - click here.