How Will My Divorce Impact My Business?

 Posted on January 13, 2024 in Divorce

Besides child custody, the division of the marital estate in a divorce is the most potentially contentious issue couples must address. Although Wisconsin is a community property state – meaning assets and property are divided 50/50 – there are factors that can make this division complex. One of those factors is if one or both spouses own a business. Determining the actual value of a business is critical to ensure that asset division is fair for both spouses, and this is why it is crucial to have a skilled Wisconsin divorce lawyer advocating for you.

The following are the key factors that should be considered when determining a business’s worth.

Methods of Valuating

The choice of valuation methodology is crucial and can significantly impact the outcome. There are several approaches, including the income approach, asset approach, and market approach:

• Income approach – This method assesses the business's value based on its ability to generate income or cash flows. The income approach estimates the present value of the future income or cash flows the business is expected to generate.

• Asset approach – The asset-based approach focuses on the value of the company's tangible and intangible assets minus its liabilities. This approach is particularly relevant when the business holds significant physical assets or the income approach is unsuitable.

• Market approach – The market approach involves comparing the business to companies similar to those that have recently sold.

Other Factors to Consider

Another important factor in determining the value of a business is normalizing the financial statements of the business. This means removing expenses or revenues that are not recurring and making sure only the usual transactions of the company are included in the valuation. This ensures that the earnings of the business are not artificially inflated or understated due to personal financial decisions.

You will also want to make sure that the company's intangible assets are included in the valuation. Intangible assets are the goodwill, patents, trademarks, customer relationships, or proprietary technology the company possesses. These assets can significantly impact the business's overall value but may not be explicitly stated on the balance sheet.

It is also important to consider the broader market conditions and industry-specific trends in the valuation. A company’s value can be influenced by factors such as its growth potential, competitive landscape, and economic conditions within its industry. Evaluating these external factors helps provide a more comprehensive understanding of the business's worth.

Contact a Rock County, WI Divorce Lawyer for Legal Representation

If you are facing a divorce that involves complex asset and property division, it is critical to have a skilled and experienced Dane County, WI divorce attorney aggressively protecting your interests and ensuring that you get the share of your marital estate that you are entitled to. Call John T. Fields & Associates, LLC at 608-729-3590 to schedule a confidential consultation and find out how our firm can help.