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Valuing a Business in a Divorce

Valuing a Business in a Divorce

If you or your spouse have an ownership interest in a business, that ownership interest may be considered a marital asset subject to division in your divorce.  As with any asset, the first question issue that must be determined is whether (or what portion) of the business interest is martial.  If the business ownership interest is marital, then you must determine what the value of the interest is. 

Determining the value of the ownership interest for divorce purposes can be complex. Some businesses have multiple owners with varying percentages of ownership interests. The type of business entity can also add to the complexity of determining a dollar amount to place on the interest. As such, when business interests are involved in a divorce, it is common for an expert to be retained to help value the business.

Certified public accountants, especially those with certifications in business valuations and forensic accounting, are commonly hired by each party to provide an expert opinion as to the value of the business. This opinion ultimately assists the parties (or the Court) in determining the dollar amount to attribute to the ownership interest.

Obtaining a business valuation is often essential when business interests are at stake in a divorce. There are three common approaches to valuing businesses:

  1. Income approach. This approach looks at the income the business generates to determine how much the business is worth.

 2. Market approach. This approach takes a broader look at the market in which the business operates and looks at comparable businesses to determine the value.

 3. Asset approach. This approach values the actual assets the business owns, less its liabilities, to determine the business’s net worth.

It is important to note that goodwill in a business is not valued in Nebraska in a divorce.

If you retain the ownership interest, you will be attributed with receiving the appropriate value from the marital estate. If you do not wish to retain the interest, or your spouse wishes to be awarded the interest, you may receive compensation for the value of your interest that is being awarded to your spouse.

If your divorce involves a business, contact our office to schedule a consultation to learn about your options and protect your financial estate. 

Angela Lennon