Understanding the Importance of an Accurate Business Valuation During Your Illinois Divorce

 Posted on January 12, 2023 in Divorce

Whether it is a startup, franchise, family business or long-term established company, if you own a business, an accurate business valuation is critical for your Illinois divorce. A fair and accurate assessment of the value of the company can help ensure that both parties in the divorce receive equitable settlements and that any debt incurred during the marriage is split fairly between them.

If you or your spouse own a business and you plan to divorce, make sure you understand your rights and work with a divorce lawyer experienced in business ownership matters. Divorce is complicated regardless of the couple's financial circumstances, but it is especially complex when one or both spouses own a business.

Why an Accurate Valuation is So Important

In a divorce, each spouse has the right to receive an equitable share of the marital estate. If a business was acquired or established during the marriage, it is most likely a marital asset. Businesses started before a marriage may be non-marital assets. However, any increase in the business's value may be considered marital property. To ensure that each side receives their fair share, an accurate assessment of the value of the business must be performed.

How to Value a Business

Determining the value of a company is no easy task. It requires a thorough review of the company's financials and other paperwork. To get an accurate business valuation, you may need the help of a professional. This could include a forensic accountant, appraisal expert, or business valuator.

It is important to remember that there are different methods for valuing companies depending on their structure and purpose. For example, a business appraiser may use different methods to evaluate a franchise than they would for a family-owned business.

The most common business valuation methods include:

• Market Approach - This approach values a business by comparing it to similar companies in the same industry. It looks at sales of comparable businesses and takes into account any differences that may affect value.
• Income Approach - This method uses the earnings and profitability of a business to calculate its value. It takes into account current and future profits, expenses, and other factors.
• Asset Approach - This approach values a business based on the value of its assets. It looks at tangible items such as property, inventory, equipment, and accounts receivable.

Contact a Palatine Business Asset Division Lawyer

If you are getting divorced and you or your spouse have a business, the valuation and division of business assets must be handled carefully and accurately. Contact our Arlington Heights divorce attorney to get the guidance you need. Call 847.873.6741 and set up your free initial consultation today.

Source:

https://www.investopedia.com/terms/b/business-valuation.asp