small businesses

How Is a Business Valued in a Florida Divorce?

One of the most complex and frustrating aspects of divorce can be the division of marital assets. In Florida, marital assets are subject to equitable distribution in divorce. This means that, while most of the time assets are evenly split, the priority is that the assets are divided in a manner that is fair. In other words, if there are factors at play that would merit an unequal division of the marital assets in order to help ensure that the split is fair, then the court will act accordingly.

In some cases, a business may be included in whole or in part as a marital asset and, thus, must be valued and may be subject to division or sale and the proceeds are split. Valuing a business can be challenging as there are so many layers and factors to take into account. Valuation of a marital business, however, must be done as part of the divorce process. There are a few different ways that the valuation of a business may occur.

How is a business valued in a divorce?

Before approaching the task of valuing a business in divorce proceedings, an expert, such as a business appraiser, is usually employed to conduct the valuation. The business appraiser will then determine what method of business valuation will be employed. There are three primary methods of business valuation that are used. They are:

  • The market approach: To reach the value of a business with this approach, the business appraiser will compare the business’ value to the baseline businesses that are comparable in size and nature. In other words, the marital business is compared to the value of other similarly situated businesses with similar interests that were recently sold. It is critical that the two businesses be as similar as possible in order to help ensure a more accurate valuation.
  • The income approach: This approach is one of the most commonly employed methods used by business appraisers valuing businesses incident to divorce proceedings. With this method, the appraiser utilizes the business’ current earnings or projected future earnings. If projected future earnings are used, then the future value will be determined through assumptions and different formulas in order to arrive at a value of the business presently.
  • The cost approach: This approach centers on the idea that a potential buyer will not pay more for the business than what is reasonably necessary to obtain the company’s assets when considering its liabilities.

There are other factors that a business appraiser may take into account when valuing a business. For instance, the intangible business asset of goodwill can be quite valuable. Goodwill includes things like how established a business is in a community and how dedicated its customer base is.

Florida Divorce Attorneys

The division of marital assets can have a profound impact on the financial future and wellbeing of the parties involved. When businesses are involved in this process, things can get very complicated very quickly. The dedicated divorce attorneys at Orlando Family Team will help unravel the complexities involved in this critical stage in the divorce process. We will work to ensure that your best interests are always protected. Contact us today.