Divorce is never an easy process, it’s emotionally fraught and legally challenging. Even in the simplest circumstances, when divorcing spouses rent a home and own few assets, the division of marital assets is often contentious and may end in a contested divorce rather than a settlement agreement.
When spouses own one or more businesses, the divorce process becomes more challenging. Spouses with an enforceable prenuptial or post-nuptial agreement must follow the agreement’s stipulations for handling the division of their assets, including a business, but for spouses without a prenup, the process often involves legal disputes.
Although marital property often requires valuation before divorcing spouses can divide their assets in a way that’s “fair and equitable” as required by law, the valuation process for a business quickly becomes complex.
The way spouses divide their business during the divorce process has long-term implications for their finances after the divorce. The value of a business begun during the marriage must be fairly and equitably divided between both spouses, even if only one spouse owns and works at the business.
Additionally, one spouse may have a claim on half of the increased value of any business owned by one spouse as their separate property before the marriage if they spent time, money, or talent improving the business.
To determine the full value of a business, the first step of the process is to hire valuation experts. Spouses may either agree to hire a neutral expert, or each may hire their own experts.
When spouses use individual experts, the separate valuations may be substantially different depending on the method the expert used. Often, each spouse uses this process to their advantage to advance their desired outcomes. A judge must look at all evidence, including single or separate valuations to determine how the spouses must divide the business fairly.
There are several different approaches to determining the value of a business and each may arrive at different conclusions. Different methods used include the following:
Some valuation experts consider all of the above approaches and then average the results to make a final determination.
Business owners often devote years of their lives to building up the value of their business. Divorcing without a prenuptial agreement can put their business interests at risk. It’s essential to hire a Denver, Colorado divorce lawyer with experience in business-owner divorces to guide you through the process.
Because different experts can arrive at different bottom lines during business valuation, an experienced Denver divorce attorney assertively defends your best interests throughout the process. Call Ciancio Ciancio Brown, P.C. so we can begin the best strategy to achieve your desired outcome.
