In a high-asset divorce, it’s quite likely that one person will be a business owner. If they are, that business may qualify—at least in part—as a marital asset.
This means that properly valuing the business is an important part of the divorce process. But how do you do it? There are a few different tactics that can be used.
Multiplying revenue
For instance, by considering both the industry and the economy, a business’s revenue can sometimes be multiplied by a certain amount to determine its overall value. For example, a company may report its earnings for the last year, which will then be multiplied by three to find the overall value of the company itself.
The share price
Market capitalization is another potential tactic used for companies that are publicly traded. This value is determined simply by looking at how many shares exist and the value of each share. If there are 100,000 shares and each one is valued at $100, then the business would be worth $1 million.
Comparable sales
Finally, it can sometimes help to look at other businesses that have sold, which can help to provide an idea of the real market value of that business. This can be complex, however, since every business is unique. The comparable sales would have to be in a similar industry, and the business would have to be a similar size.
Often, the valuation process will involve looking at many of these factors and considering the value from a few different angles. It’s crucial for those who are going through a high-asset divorce to understand exactly what assets they own, what value those assets have and how they can move through the legal process to get a fair share in property division.