How Important Is a Business Valuation during a Divorce?

The economic landscape of the U.S.tends to be classified as “big business” but surprisingly small family-owned and operated establishments, employing less than 20 employees, accounts for 86.4 percent of the gross domestic product or GDP. With such a high percentage it is not unrealistic to consider that at some point in time owners of such businesses, often married, run into relationship turmoil often leading to many questions regarding not only the dissolution of a marriage, but the effect a divorce may have on the business.

As each respective divorce attorney will construct a market value comparison for the couple’s residence, Illinois law also requires an independent and detailed valuation of the business.

If you and your spouse find yourselves in this type of situation, the following information may provide some insight as to what is expected under the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5).

Business Valuation Basics

Most often the type of business valuation depends heavily on the unique strengths of the business as well as the stability and future profitability of income expectations.

Contracting an independent entity to conduct the valuation and establishing a clear thumbprint of the business is essential, especially during a divorce. This practice alleviates one spouse underestimating the financials of the business and to avoid any speculation during the divorce process.

Business Valuation Considerations

For both spouses and their legal teams, the questions arising from determining the fair breakdown of a family business is complicated. Examples of these questions may include:

  1. Is the business expected to survive the divorce?
  2. Should the spouse with the majority of responsible be entitled to a larger share?
  3. Is the other spouse involved in the day-to-day operations of the business?

Opening the business and the books to a valuation is essential. Not only does the valuation process clarify any outstanding issues by reaching a fair and objective determination but it thwarts the leaving of one spouse in the dark about equitable division of property.

As divorce is a life-altering, emotional and stressful experience, those involved in a family-owned business may find the uncertainty about their financial future can only compound matters.

If you find yourself not only facing the difficulties of divorce but have spent considerable time building the family business, contact the skilled Hinsdale divorce attorneys of The Law Office of Martoccio & Martoccio. Our team is experienced in working with financial documents and if necessary, we will consult with accounting specialists to ensure your financial stake is protected. Contact us to schedule your consultation today.

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