Methods Used to Value a Business in a Florida Divorce
Topics like spousal support, child custody, and child support are common issues encountered in almost all divorces; however, those who own businesses will find there is added complexity when it comes to asset distribution. Those with a professional practice, like doctors, lawyers, dentists, accountants, etc., will encounter more complicated methods utilized to divide assets properly.
If you are getting a divorce and have a family business or thriving practice, you need to speak with a skilled Boca Raton divorce attorney who has experience with high-asset portfolios. At the Law Offices of Schwartz | White, we specialize in high-net worth and complex divorces. Our attorneys can help prevent your spouse from concealing or transferring business assets.
Holding a professional license does not mean it’s automatically considered marital property, nor can it be taken away during your divorce. However, the business itself may be considered marital property, and therefore it may be distributed as such during your divorce. If the court deems that your business is marital property, there needs to be a valuation done to determine what needs to be divided. It may be necessary to use the services of an expert, like a business valuation specialist.
Florida Business Valuation Methods
The expert will start by determining what standard of value will be used. This can be fair market value or another option like investment value. These two numbers are not necessarily the same. Fair market value can be defined as the monetary compensation that would change hands from a buyer to the seller. Investment value would be the monetary amount that an investor or buyer with specialized experience and knowledge would likely offer for the business.
Typically, business appraisers will use one of these options when valuing a business:
- Market Approach: This method will determine a business’s value by comparing it with baseline businesses that offer a reasonable basis of comparison. The business in question is compared to other similar businesses with similar interests that were recently sold. This method relies on comparable businesses, otherwise the expert’s value may be too low or too high.
- Income Approach: This is one of the most commonly used methods in valuing a business for divorce purposes. The expert will use current earnings or projected future earnings. If the expert uses future value, he or she will also use assumptions and various formulas to provide the business’s present value.
- Cost Approach: The cost approach relies on the theory that a potential buyer is not going to pay any more than what is reasonably necessary to acquire the company’s assets, while taking its liabilities into account.
What is Goodwill?
Some experts may calculate the goodwill of a business when providing a valuation. This is an intangible asset, but it can be explained as the continued patronage of the business. Certain things are taken into consideration, like its location, how long it has been open, current customer base, profitability, and more.
Retaining a Florida Divorce Attorney
Coming up with a business valuation can be a complex process. That’s why it’s important to retain a Florida family law attorney with experience handling this type of divorce. Contact the Law Offices of Schwartz | White at 561-391-9943.