How to determine the value of your business in a divorce?

On Behalf of | Jun 21, 2023 | Divorce, Family Law

You can determine the value of your business by analyzing the business assets. You would need to calculate the liabilities and subtract them from the business assets. Assets and liabilities can be challenging to measure because factors like intellectual property are intangible and thus impossible to fully appraise. Another way to determine your business’s value is by basing its worth on its cash flow and income potential. You can also compare your business to similar ventures in the open market. The goal is to see how much your business is worth and how that value will affect the distribution of marital property.

How will the Minnesota family court divide the business?

If you started your business while married, it is marital property. However, even though you already had your business before marriage, the assets and liabilities that grew during your marriage might have merged with your marital property.

In Minnesota, a divorcing couple can hire the professional services of a neutral business appraiser to determine an appropriate valuation. The business will then be subject to the equitable distribution principle governing marital property division. However, the court considers the contribution of each spouse in acquiring, preserving and growing the business. The court can award the business to the spouse who actively manages and operates it.

The importance of accurate business valuation in a divorce

Unlike most assets, a business involves constantly moving or changing elements. Finding the accurate value of your business can involve many legal and financial implications, especially when you risk losing it in a divorce. Its value can lay the foundation for how the court will distribute all the other marital property. Knowing how much your business is worth will help you decide if it is worth keeping.