If you and your spouse are divorcing, assets and debts will be divided between the parties as part of a property settlement agreement. This may include the division of common assets such as a home or personal possessions and it may also include a family business, which requires a closer look.
After determining what portion (if any) of a business interest is marital property for the purposes of property division in an Illinois divorce, the work begins to place a value on the business interest itself.
To put a value on a business interest may be simple or complex. If the business interest is small, and there is no dispute regarding its worth, then the parties can stipulate the worth and use that value for the purposes of dividing the marital property in a divorce.
Your attorney may be able to assist you with placing a value on your business if it is indeed small and not overly complex. A simple business valuation may be pretty straight forward…a simple asset approach formula of “assets – liabilities = value“.
However, valuing a business interest is more difficult when there are more assets, some tangible – some intangible. All the more if the parties do not agree. An expert may be needed to determine the value of the business to ensure that the business interest is divided fair and square.
Small Business Value in a Divorce
Typically, accurately valuing a complex business interest requires a combination of an asset approach, see above; a market approach, which compares similar businesses that have been sold; and an income approach, which uses historical information and formulas to predict expected cash flow and profits.
If you do need to hire someone to calculate a fair estimate of your interest in the business, your attorney can provide you with a referral to a Certified Business Appraiser (CBA), an Accredited Senior Appraiser (ASA) or even a Certified Public Accountant (CPA) if appropriate. It is important that your attorney understands and has experienced with a business valuation expert’s analysis, so you will want to hire a lawyer with a solid track record of handling complex divorce issues.
When there is a family business at stake, you will have questions regarding small business value in a divorce. Make sure you receive an accurate business valuation. Put decades of Business Law and Family Law experience to work for you and contact the Illinois Law Offices of Ronald L. Bell & Associates P.C. at 847-495-6000 for assistance.