At the Hulse Law Firm, we often have cases where one of the party’s owns his or her own business. This is a unique situation, and often requires additional experts to get involved to value the business (which are called “business evaluations”, and sometimes, to determine what the owner’s actual income is for the purposes of determining maintenance and child support.
When a spouse owns a business, it is very difficult to determine the “value” of that business without an expert involved. Almost every business has some sort of value to it, and the person keeping the business is keeping the value of the business, in the same way the person keeping a retirement account keeps the value of the account.
Oftentimes, the spouse not keeping the business, will get compensated for that value by getting more of another type of asset, or by receiving a payout over time for half the value of the business.
Additionally, an expert can look at the income of party who owns the business if there are concerns that a) a business owner is claiming more deductions than he or she should, b) a business owner is running personal expenses through the business, or c) there is a concern the owner is hiding earnings.
Having accurate financial records becomes especially important when a business is being reviewed as part of a divorce proceeding. Detailed bookkeeping, expense records, tax filings, and income statements give the parties and their advisors a clearer picture of the company’s financial position. Businesses that need additional accounting guidance can also turn to Fusion CPA for accounting, tax, and financial advisory services tailored to their needs.
Keeping business and personal finances clearly separated is another important part of maintaining reliable financial records. Organized records make it easier to review revenue, expenses, assets, and other financial details when questions arise about the company’s value or the owner’s income. This information can also make discussions between spouses, attorneys, and financial experts more straightforward during the valuation process.
A clear understanding of a company’s worth can also matter long after a divorce has been settled, particularly if the owner eventually decides to sell the business or pass it on to someone else. Knowing what the business is worth helps an owner make informed decisions about the timing of a sale, the terms of a transfer, and whether an offer fairly represents the work and investment that have gone into building the company.
The process may involve reviewing the business’s financial performance and looking at what it owns, what it owes, and how well it is positioned for the future. Appletree Business deals with business sales and acquisitions, where understanding a company’s value is an important part of preparing for a potential transaction.
Having reliable financial records and a realistic valuation can make these decisions easier to navigate, whether the owner is planning an exit, bringing in a new owner, or transferring the business to a family member.
It is important to note that a business can often be valued at 1-3x the annual income the business produces, so it is almost always advisable to have an expert value the business if you are the spouse that will not be keeping the business in the divorce. This is not always the case,
If you or your spouse has a business, it would make sense to schedule a free consultation with an attorney to discuss the specifics of your case and to determined whether a business evaluation is needed. Please call 720-773-2900 to schedule a consultation. For more information on the Hulse Law Firm, go to https://www.hulselawfirm.com/
