Couples in a high-asset divorce case have a lot to lose. If they own a business or a stake in a business, they need to hire divorce lawyers who are proficient in business valuations. The process requires an accurate account of the entire marital estate. While assigning values to non-complex assets such as furniture and vehicles is simple, assigning one to complex assets such as business interests requires professional legal aid.
When a Business Is Considered a ‘Marital Asset’
The state of Illinois uses 'equitable distribution' to divide property between spouses during a divorce. This means both parties receive a fair and equitable portion of marital assets. If a business was founded while the couple was married and before they were legally separated or divorced, it is likely considered a marital asset.
However, if either party owned a business before marriage, some of their business assets may also be considered marital property. Additionally, business interests stemming from the non-marital property can be converted into marital property if they are commingled with other family-owned assets. This includes shared accounts which are used to manage business and family finances.
If a non-marital business that one spouse owns increases in value because of the other spouse's contributions, that value can be considered a marital asset. In this case, the spouse who owns the business may have to reimburse the other for said contributions.
Business Valuation Methods
Whether your business is considered a marital or non-marital asset, your attorney will oversee a complete evaluation to understand each spouse's income, assets, and financial resources. Your attorney will work closely with financial appraisers or accountants for an accurate business valuation using the following methods:
In this approach, your attorney will evaluate businesses similar to yours that have recently been sold. These businesses are within similar geographic areas as well. The business evaluation team can use these aspects to determine a prospective purchasing price. Divorce lawyers can use a market-value approach if the couple decides to sell a marital business and split the proceeds.
In this approach, the total value of business assets (real estate, intellectual property, equipment, etc) is calculated. The value is determined when liabilities (debts and other pending payments) are subtracted from the total valuation.
In this approach, the business evaluation team examines past earnings of the business while considering future growth potential. It helps them determine the estimated cash flow that can be expected from the business in the future.
Among other valuations, your attorney will also consider the following to determine the value of your business:
The nature and type of business
Stock market value
Value of comparable stocks in the open market
The existing financial condition of the business
The maximum earning capacity of the business
Contact a DuPage County Business Valuation Lawyer Today
Protect your financial interests and future by ensuring your business interests are handled properly during a divorce case. To learn more about the process, contact us at Andrew Cores Family Law Group for a free consultation by dialing 630-871-1002. Our DuPage business valuation attorneys can help you with available legal options.