Business Valuation for Divorce and How to Determine your Business' Value
Getting a divorce in Kentucky is hardly ever an easy process. Even when the spouses are in agreement on most of the issues, it can still be contentious. This is especially true when there is a business involved and business valuation is necessary.
Even if you have just a small business, it will need to be valued in the divorce. Performing a business valuation is much harder than you may realize. You may be biased because you own the business. You may think it is worth a lot more than it really is. You need to determine the fair market value, which should not be a guessing game.
When divorcing, there are several things to consider. For example, is the business a marital asset (most likely, yes, at least to some degree)? Do both spouses have ownership of the business? Does one spouse plan to buy the other spouse’s ownership? If so, how much is that ownership worth? A business valuation can help answer these questions and make your divorce fair and amicable.
How to Determine Your Business’ Value
There are several ways to determine the value of your business:
- Add up your assets. Add up the value of all assets owned by the business, including equipment and inventory. Once you get that number, subtract your debts and liabilities. The difference will be a number that can at least serve as a starting point for determining what your business is worth. But keep in mind that your business is probably worth a lot more if you consider revenue and earnings.
- Use a formula. Calculate the value of your business using a price-earnings (P/E) ratio, which is the share price divided by the earnings per share. You can do this by estimating the earnings of the company over the next few years and then multiplying it by the P/E ratio.
- Base it on revenue. Calculate how much your business generates in annual sales and then determine how much a typical business in your industry might be worth based on that sales number. For example, the value might be double the amount of sales. A stockbroker may be able to help you.
- Hire a professional. Ultimately, you should choose to have a professional valuation performed to ensure your business is valued properly. While you can use a variety of formulas to calculate an estimated value, you also need to consider factors such as location and industry to arrive at the proper value.
Contact Us Today
If you are a business owner who is going through a divorce, you will need to get a valuation on your business so it can be properly split in a divorce. Even if you have a small business, you will need to go through this arduous process.
Velez Law, PLLC will work diligently to protect your legal interests. Get help for your complex divorce today. Fill out the online form or click below link to schedule a consultation.
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