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Putting a value on a business during a divorce

| Aug 27, 2016 | Divorce

Property division discussions between divorcing spouses in Minnesota often become contentious, and these negotiations can be particularly challenging when one or both of the parties involved owns a business or holds a major stake in one. Placing a dollar value on a commercial venture is not always straightforward, and experts may sometimes be called in to untangle complex financial records, partnership agreements and other documents.

This kind of auditing can be expensive when the business involved is well-established, and spouses may sometimes opt for a basic calculation of value rather than seeking a more involved full valuation. When divorcing spouses are unable to reach an agreement and family law judges or arbitrators are called upon to make property division decisions, a full valuation of a sole proprietorship, partnership, LLC or corporation may be warranted. However, calculations of value could suffice when negotiations are more amicable or in less formal settings such as mediation.

The drawbacks of a full business valuation include the costs involved and the length of time that financial experts generally take to come up with a final figure. Calculations of value are cheaper and faster, but they lack the detailed information of full valuations and may not be as accurate or take as many variables into account. A calculation of value may also be inappropriate for gauging the worth of complex businesses or those operating in evolving sectors of the economy.

Experienced family law attorneys may take several factors into consideration when divorce issues involve a business. Couples who are separating amicably will often seek a compromise during property division negotiations, and a basic business valuation may be all that is required in these situations. However, companies can be used to divert income or conceal assets, and attorneys may seek a more comprehensive valuation when the spouses involved have become entangled in acrimonious disputes or financial malfeasance seems likely.

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