Your family business may be the biggest asset in your marital estate — which is why an accurate valuation of that business may be key to achieving a fair divorce settlement.
Unfortunately, it isn’t uncommon for divorcing spouses to hold wildly different opinions about how much a family business is worth and what type of cash flow is available. This is particularly true when one spouse is the managing, or active, partner in the business and the other is barely involved.
So, how can you resolve the issue when you’re saying the business is making (at best) a modest profit and your spouse thinks that you’re virtually spinning gold on the premises?
You get an accountant to do an accurate valuation of the business.
It’s important, however, to make certain that you get the right accountant to do the job. Otherwise, your efforts (and your money) can end up wasted.
First, you want to be certain that the accountant you hire is up to the job. There’s a lot riding on this, so the court needs to be certain that the accountant you use has a certain level of expertise in the process of business valuations. It’s a specialized skill that roughly only 1 percent of accountants have. Accountants who hold designations like “Certified Valuation Analyst” or “Accredited in Business Valuation” have special training, go through ongoing educational training and have met other requirements that qualify them as actual experts in this particular task.
Second, you want to make certain that the accountant you hire is capable of explaining his or her conclusions — and the evidence that supports them — to others. Even if an accountant is saying exactly what you hoped to hear, it won’t help you avoid costly litigation with your spouse if the accountant can’t easily break down the figures and explain exactly where they come from in a manner that’s clear.
Ultimately, the right accountant can save your business from becoming a “divorce casualty,” which is what can happen if a business is overvalued and too much money is diverted out of it an into the divorce settlement and support payments.
Source: Nov. 30, -0001