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Business valuation essential when owners divorce

| Apr 26, 2018 | Property Division, Property Division |

The assets of business owners or partners in Arizona generally represent marital property when they seek divorce. As a community property state, the law requires equal division of marital property. For this reason, someone entering the divorce process needs to calculate accurately the current value of business holdings. An independent forensic accountant has the training to open a company’s books and determine the valuation.

An impartial accountant will know how to interpret business records and be alert for information that could be missing. Some divorce cases involve spouses attempting to hide the true value of a company in order to offer the other spouse lower settlements. Alternatively, a business might have hidden debts, like off-the-books loans, that need to be disclosed prior to a settlement.

To arrive at a figure, an appraiser will investigate real estate, computers and equipment. Annual income, anticipated growth and the value of a brand name will influence the final calculation as well. After valuation, the parties will negotiate the terms of the split. The outcome could be a cash payout to the other spouse, a promissory note if funds are not available or a trade of one asset for a comparable one. When making decisions of this nature, the spouses should make themselves aware of any tax obligations that could arise from financial distributions.

A person contemplating a divorce who owns all or part of a business may wish to consult an attorney to gain specific advice about how the valuation and property division could play out. An attorney may review the terms of any agreements that might be in place, such as a prenuptial or partnership agreement, to determine their effect on the divorce. An attorney might also manage negotiations and strive to resolve disputes. When necessary, an attorney may be able to defend the person’s position in court.