How to Calculate the Value of Your Business During Your Illinois Divorce

 Posted on September 24, 2020 in Business and Divorce

Business ownership is a key asset that you must include in your divorce. Even if you started your business before you married, the amount that your business increased in value during your marriage will likely be part of your marital property. Calculating the value of your business is a vital step because it will affect how you divide other marital properties. If you wish to maintain complete ownership of your business as part of your divorce, a higher valuation may force you to compensate your spouse with more assets. Business valuation for a divorce can be complicated and requires professionals with experience in both divorce and business.

Choosing a Valuation Method

There are multiple ways that you can calculate the value of your business:

• The asset approach values the assets that a business owns and subtracts the liabilities to calculate its total value.
• The income approach looks at the business’s past profits and cash flow to predict its future income.
• The market approach estimates what the business would be worth in a sale based on the recent sales of similar businesses.

A business evaluator may consider all of the methods, but the valuation method that they rely on the most will depend on the type of business that you own. For instance, the market approach may not be useful if there is not a comparable business that was sold, and the asset approach becomes more difficult if your business has a lot of intangible assets.

Accounting for Goodwill

Business and personal goodwill is an aspect of the valuation process that is important during a divorce:

• Personal goodwill is the value that a business derives from its owner, which would be lost if someone else owned the business.
• Business goodwill is the value that a business has, regardless of who owns it.

A business may have high personal goodwill if customer loyalty is based on the customers’ positive relationship with the owner and his or her employees. Personal goodwill is not a marital asset in Illinois, and the estimated value of the personal goodwill will be subtracted from the business’s value.

Contact a DuPage County Divorce Attorney

You may consider yourself knowledgeable about your business and its value, but that is not the same as evaluating your business for the purpose of divorce. At Calabrese Associates, P.C., we work with professional business evaluators to calculate an accurate value for your business. From there, we strive to protect your business during your divorce, along with other important marital properties. Schedule a consultation with a Naperville, Illinois, divorce lawyer by calling 630-393-3111.

Source:

http://www.smbceo.com/2019/11/19/how-to-value-a-small-business-for-divorce/