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How to properly valuate your business in a divorce

On Behalf of | Feb 23, 2022 | Divorce & High Asset Divorce |

The property settlement phase of your divorce is likely to be the second-most fraught and contentious part of the process (families with minor children report custody battles as the first). Connecticut is one of the majority of states that operate under equitable distribution rules when dividing marital property in a divorce.

What that means is that the property does not necessarily get split evenly but it does get divided fairly. To that end, accurately valuating the marital property is paramount in your divorce. Below is some information to help you determine the ownership interest of your business.

Valuation date

In Connecticut, the valuation date for purposes of splitting property is the date of the dissolution of the marriage. If your divorce is not yet final when you retain seek professional guidance to set a value, you may substitute the current day instead.

Liabilities and assets

With so much at stake — either your livelihood or a major investment — it’s worth the money to retain a forensic accountant to assess the value of your separately or jointly owned company. The accountant will go over your books and see what is owed and take inventory of all your company’s assets, including intangible assets like goodwill generated from customer relationships.

Profits from your business

Take your company’s revenue and subtract its expenses to determine the profit. That gives you an up-to-date value for the company when allocating shares.

Did the value increase?

The court must determine whether a company’s value significantly increased or decreased during the marriage. If the business was separately owned from before the marriage, any marked increase could be attributed to the non-owner spouse’s efforts. If the non-owner spouse worked at the business without proper compensation or otherwise contributed greatly to its expansion, the judge can award that non-owner spouse with a partial interest in the company.

Complex matters to resolve

Property settlements can be challenging and complicated when spouses have large assets to split like companies. Your forensic accountant will work closely with your family law attorney to make sure that you get what you are owed.

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