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The importance of business valuation in many Minnesota divorces

On Behalf of | Mar 11, 2024 | Divorce |

Divorce is never an easy process. Even in situations where spouses agree that divorce is necessary, they may have a hard time managing their emotions throughout divorce proceedings. Personal circumstances can easily complicate divorces.

Unusual employment arrangements and personal holdings are among the most common complicating factors in modern divorces. Someone who owns a small business arguably has both of those challenges to address. It can be very difficult for a business owner to navigate the divorce process without endangering the future of the organization that they own and help operate. Those who prioritize properly valuing a business may set themselves up for a smoother divorce process despite their complex situation.

Business valuation may dramatically influence property division matters

The most valuable assets that spouses own frequently become the biggest bargaining chips during divorce negotiations. Oftentimes, spouses end up focusing on their marital homes or their retirement accounts.

A business could be worth more than both of those resources combined. It may also represent substantial future income for the spouse who retains the company. Of course, businesses can also have major liabilities and operational costs that consume much of the revenue they generate. Someone unfamiliar with the company’s debts and operational costs might overestimate what the company is worth and how much of its revenue is actually profit.

Therefore, it is of the utmost importance that those preparing for divorce have a realistic idea of the current market value of the business. Business valuation takes different forms in different circumstances. Calculating the liquidation value of business resources, estimating future revenue even making adjustments for asset depreciation can have a major impact on what a company is worth for the purposes of property division.

That final valuation figure can have major implications for the business itself and the other marital property in play during the asset division process. Minnesota’s equitable distribution law means that the goal is fairness, not necessarily an even split. Business valuation is so important that those preparing for divorce may want to secure professional support as they estimate the economic value of their company and then attempt to integrate that into property division decision. Establishing what a business is worth is a crucial step in the overall property division process when someone with an ownership interest decides to divorce.