Business Valuation in Divorce

People who own their businesses enjoy many liberties not found in traditional employment settings. While owning a business comes with many benefits, when business owners divorce, determining the value of business assets and business ownership rights can be a contentious and challenging process. If you or your spouse want to end your marriage and either of you owns a business, it is in your best interest to consult an attorney as soon as possible. Miami attorney Sandy T. Fox is a Florida Bar Board Certified Specialist in Marital & Family Law who can help you seek an accurate assessment of your business’s value and a fair determination as to whether it constitutes a marital or separate asset.  He regularly represents parties in divorce actions in Miami and other cities throughout South Florida.

In Florida, all property and assets obtained during the course of a marriage, including businesses, are presumed to be marital property. Thus, if a party acquired a business while he or she was married, absent a pre-marital or post-marital agreement stating otherwise, it is likely considered marital property. Even if a business is clearly defined as separate property, if the non-owner spouse helped to grow the business or marital funds were used to support the business, at least a portion of the business may be considered marital property. If a company is deemed a marital asset to any degree, it is essential that the parties obtain an accurate assessment of its value.

Broadly speaking, businesses have a book value, which is the worth of any assets and property minus any liabilities, and a fair market value, which is what a buyer would be willing to pay for the business in a reasonable situation. Typically, the fair market value of a company is higher than the book value. In most divorce cases, the Florida courts calculate the value of a business by determining its fair market value, which measures the value of the assets of the business plus the value of goodwill. Notably, enterprise goodwill, which is the value of a company that surpasses its tangible assets and represents the tendency of clients to return and recommend a business regardless of the reputation of the individual owner may be a marital asset subject to equitable distribution, while professional goodwill, which arise due to the reputation, skill, or work of an individual is not a marital asset.

There are numerous ways to determine the fair market value of a business, and in many instances, parties will disagree as to which method should be employed. Regardless of which method is used, both parties will most likely need to hire forensic accountants or other experts to determine the value. Typically, forensic accountants will examine a business’s financial records, including bank statements, projected and actual revenue, tax returns, liabilities, and annual operating expenses to determine its value.

The asset-based approach looks solely at a business’s assets and liabilities and is generally disfavored as it does not account for the intrinsic value of intangible assets. Some parties will use a business’s adjusted book value, however, which is an asset-based approach that looks at the market value of a business, minus any liabilities, to determine its worth. Income-based appraisals rely on how much revenue a business is likely to generate in the future, based on numerous different factors. Finally, the market-based approach examines sales of comparable businesses to determine the fair market value of a business. In cases involving unique businesses, it can be difficult to employ the market-based approach.

Determining the value of a business can be arduous and complicated under any circumstances, but when business valuation occurs in the context of divorce, it is critical that it is performed accurately. If you or your spouse own a business and either of you intends to end your marriage, it is in your best interest to hire an attorney with experience handling divorce matters involving privately-owned companies. The knowledgeable Miami attorneys of the Law Offices of Sandy T. Fox, P.A., are skilled at navigating the complexities of divorce cases involving business owners, and if we represent you, we will zealously pursue a fair assessment of property rights. We have an office in Aventura, and we regularly represent people in divorce cases in Miami.  You can contact us to set up a confidential and free consultation via our form online or by calling us at 800.596.0579.