Chicago Divorce Business Valuation Lawyers
Divorce is similar to a business transaction, and in many divorces, setting a value on and dividing the family business is a major concern. Often, a couple's most valuable assets are the family home and the family business. While the value of a family home can often be determined by a quick look at the comparable housing market, no such similar market exists for many family businesses.
Business valuations in Illinois rely on a detailed analysis of the business to determine its true value. Methods of business valuations may rely on the unique strengths of the business, its ability to create current or future income, and similar factors. A clear view of a family business's value from an independent business valuation professional is essential for handling the business in an equitable fashion during the divorce.
Unfortunately, in contentious divorces, the spouse operating the family business may withhold information about the business's financial profits. He or she may exaggerate any downturn in business in the hopes of convincing the other spouse to accept less than his or her fair share of the business's value. Or the spouse who does not operate the business may insist on an unreasonably large share, not considering the true position of the business in the market and its actual ability to make money. Often, an independent business valuation is the only way to settle a bitter battle over a family business.
Under Illinois state law, business assets are determined at “fair market value.” The law states the following:
“In determining the value of assets or property under this Section, the court shall employ a fair market value standard. The date of valuation for the purposes of division of assets shall be the date of trial or such other date as agreed by the parties or ordered by the court, within its discretion.”
It is important that you receive your fair share of any business assets in a divorce. To do so, financial experts can be called upon to perform a professional valuation of the enterprise. If you own a business that was established before your marriage, the cash flow provided by the business can be in contention. It is crucial to have legal representation with extensive knowledge of this factor in a divorce, and who will work to achieve an equitable outcome.
Business “goodwill” is an intangible asset of a company. Over time, a business develops intellectual property, brand loyalty based on name and reputation, skilled employees, and customer loyalty. These intangibles increase the value of a business. Goodwill has an array of components, including unique procedures established by a business, customer and other databases, a company’s good name, suppliers, mailing lists, computer programs, training, and other proprietary systems, among others. Businesses add goodwill to their balance sheets by subtracting tangible assets from the cash flow history, or projected cash flow.
Business Valuation Methods
The method used determine the value of a business that is considered marital property can vary, with three options:
- Market value: The market value of the business, or the price it could achieve if sold on the market today.
- Business income: The business tax returns, profits and losses, and contracts can be evaluated to estimate future projected earnings. In other cases, the business valuation is discounted, reducing predicted earnings due to an array of potential business risks.
- Business assets: This approach is the sum of the current value of the business and goodwill established over time, minus business debts. Business goodwill can be a sizable portion of the value of a business.
Business valuations are among the most complex aspects of a divorce. Splitting a family-owned business fairly can be difficult for both parties. It could not be more important that this issue is addressed with the help of a qualified, experienced divorce attorney with a breadth of experience in high net worth divorces. At Nottage and Ward, LLP, our Chicago divorce lawyers are considered the premier divorce firm for cases involving business valuations, complex estate and succession planning, and have more than 30 years of experience in high net worth divorce.
The questions surrounding the fair disposal of the family business are often complicated. Does the spouse running the business have a right to a larger share than the spouse who is not involved? If the business was started by one spouse before marriage, who is entitled to it and for how much? What happens to the business when the marriage ends? A business valuation can help clarify these and other issues by setting out the facts and details before the parties, allowing them to negotiate based on a clear, objective picture of their financial and legal situation. Without a business valuation, both spouses are negotiating "in the dark" - taking guesses as to who may be entitled to what without knowing precisely what is at stake.
Divorce is a life-changing and often emotionally draining experience. When a family business is at stake, you need objective, experienced legal and financial help to ensure that you receive the portion of the family's largest asset that you need and deserve. The experienced Illinois high asset divorce lawyers at Nottage and Ward, LLP have dedicated over thirty years to helping individuals with the legal and financial aspects of divorce. We consult experienced professionals to ensure that business valuations are accurate. We are experienced negotiators who will represent your interests in mediation and in litigation based on the facts. Contact us at (312) 332-2915 today to schedule an initial consultation.
- Options for Divorcing Couples That Are Business Co-owners
- The Business of Divorce
- Business Valuation and Divorce
- The Importance of Pre-Nuptial Agreements for Married Couples Who Own a Business
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