A formal business valuation can help you obtain a settlement

On Behalf of | May 19, 2020 | Firm News |

Illinois divorces that include one or more businesses add complexity to the proceedings. Even if your split is otherwise amicable, issues surrounding the company often cause contention. Whether the entity is marital property and how much ownership is worth are questions that must have answers before obtaining a settlement. We frequently help achieve favorable terms for high net worth clients. 

According to Carr Rigs & Ingram, understanding your business’s value is essential for making the divorce proceedings as smooth as possible. Qualified professionals use several factors when calculating its worth. 

Fair market value 

Sweat equity measures the effort and time put into the business. This often results in increased value from the business owner’s perspective. However, it is an impractical measure for the fair market value of the organization. A business owner that sets the value using a multiple of net revenue or gross revenue may achieve an inaccurate assessment. Professionals use a more thorough method for valuations. 

Revenue elements 

One spouse frequently has more involvement in the business than the other. In such situations, the less involved partner may feel the company is more valuable than the one who sees the numbers regularly. An official valuation considers not only forward-looking financials, including expenses but also historical data. 

Unbiased perspective 

Complications in a divorce typically occur when one party feels that the other is taking advantage of them. Having the business evaluated by a neutral third-party and distributing the information to both you and your ex can reduce these anxiety levels, increasing the likelihood of reaching an agreement. High asset divorces often require financial experts and forensic accountants who can help resolve issues in other areas of your split for equitable distribution of assets.