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Understanding the business valuation process

On Behalf of | Aug 14, 2023 | Divorce |

In addition to being partners in marriage, some spouses decide to be partners in business as well. If they decide to divorce; however, they will need to complete a business valuation. This ensures that when their assets are divided, the business is included as part of the fair and equitable distribution of property to each spouse.

Business valuation process

The business valuation process starts when a professional appraiser requests financial information about the business. This could include tax returns, business records and debt statements.

The appraiser may value the business based on the business’s future income and profits, on similar businesses in the market, or on the net value of the business, which is the total assets minus the total debts. Once the appraiser completes the valuation, they will provide an appraisal report to the spouses.

Disagreements with the valuation

Sometimes, there are disagreements with the appraiser’s valuation. The spouses have the option to seek a second valuation opinion if they choose. It’s best to choose an appraiser who is independent from the first appraiser.

The spouses can also negotiate the valuation to reach an agreement. They may decide to do this through mediation or arbitration.

With mediation, the parties meet with a neutral third party who will help them make a decision. With arbitration, the parties will present evidence to an arbitrator who will decide for them. An arbitration decision is usually binding. If there is still a disagreement, the parties have the option to go to court.

If spouses need help to resolve a business valuation dispute, there is assistance available.

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