Waterford & Clarkston Business Valuations Lawyer
A key aspect of any Michigan divorce is the equitable division of marital assets. Marital assets are essentially any property acquired during the marriage, with some exceptions. Marital assets can therefore include the ownership of a business or an ownership or investment stake in a business. Even if the business was acquired before marriage, the value added to the business during marriage can be part of the marital estate subject to equitable division in divorce. The value added to the business by or during marriage can also occur if marital funds were used to invest in the business or if each spouse personally contributed to the growth and operation of the business. Some of these legalities might be complex or confusing, and that is why it’s important to reach out to an experienced Waterford & Clarkston business valuations lawyer at Clarkston Legal, who will help you along the way.
Valuing the business is essential to an equitable division of property
Including the business or a portion of its value in the marital estate does not necessarily mean that the business will be sold because of the divorce, but it does mean that the business must be accurately valued in order to be included in a fair division of all marital assets. The financial statement doesn’t always tell the whole story about the value of a business. There are, in fact, many different ways to value a business, and the business valuation method chosen can have a large impact on the property division in a divorce. The skilled and knowledgeable divorce lawyers at Clarkston Legal can help you choose the appropriate valuation method and assist you in the property division in your Waterford & Clarkston divorce.
The value of a business may be overinflated or underinflated for strategic reasons in a divorce. If you are not the business owner, it is important to understand business valuation methods so you can be sure you are being treated fairly. For instance, the valuation method applied to a manufacturing company may not appropriate for the valuation of a professional practice.
Formal discovery is a key component of business valuation. At Clarkston Legal, we work with teams of CPAs, forensic accountants, licensed commercial realtors and other professionals as needed to effect a fair and accurate valuation. Michigan courts have strict requirements for admitting expert opinions in court. Our years of experience in Waterford & Clarkston divorce matters helps ensure that the right evidence will get in front of the judge as needed. Our attorneys are prepared to address complicated business valuation questions involving:
- Depreciation of assets
- Factors specific to cash businesses
- Whether the owner will continue to run the business or sell it
- How much of the business is tied to personal goodwill
- The propriety of a multiplier method for rental income or a real estate business valuation
- The propriety of an earnings multiplier in valuing a going business
Our experienced divorce lawyers work with experts and consider a number of different valuation methods, including:
Book Value – This method totals up assets less depreciation, but it doesn’t consider goodwill or other intangible assets, and it doesn’t consider earnings potential. Often this method results in a low valuation. One could say that book value makes sense for a dying business but not a thriving one.
Market Value – What is the business worth to an outside investor or purchaser? In this method, the business is compared to similar businesses which have recently sold. Choosing comparable businesses is key, and understanding similarities and differences can be quite complex.
Going Concern – What is the value of a business that is continuing to operate? This method includes intangibles in valuation and generally yields a higher valuation.
Income approach – Comparing current profitability with projected growth.
Business valuation concerns should also consider the issue of a double dip, which can arise when a business owner gives a portion of the business value to the other spouse as part of the property division and is also paying spousal support (alimony) from business income. Although it may sound unfair, a double dip may still be equitable, depending on the disparity in incomes and resources of the divorcing spouses. The Michigan Court of Appeals has ruled this way on the concept of the double dip in recent years.
What if the spouses own the business together?
A number of different options may be available to divorcing spouses who own the business together, such as:
- One spouse buys out the other spouse’s ownership interest
- The spouses agree (or the court orders) to sell the business and split the profits
- One spouse keeps the business, and the other spouse gets other valuable property in-kind
- The spouses continue to operate the business jointly
In any event, a proper business valuation is still critical to a just result.
Get Skilled, Professional Legal Help with Business Valuation in Your Waterford & Clarkston Divorce
For help with business valuation in an Waterford & Clarkston divorce, call Clarkston Legal at 248-886-6600 for a free consultation with skilled and knowledgeable Waterford & Clarkston business valuations lawyer.