Placing a Value on a Business

Typically, the largest assets in a divorce case are the home, retirement accounts and the family business. Placing a value on a home or on a retirement account is relatively easy. For the home, a quick appraisal will suffice and for the retirement account, a print out of the value is sufficient. Unfortunately, placing a value on a family business is not soo simple and can also lead to lengthy and costly litigation.

Challenges in Valuing a Business

In Illinois, business valuations rely on a very detailed analysis of the business in order to determine its true value. In order to equitably divide the value of the business in a divorce, an independent business valuation is necessary. The business valuator will provide an in depth and detailed examination of the business. In a perfect world, both parties will be forthright and honest in dealing with the valuator.

Very often, however, in a contentious divorce, the spouse who operates and runs the family business may withhold critical information regarding the business’s profits and/or exaggerate the business’s losses. Of course, this spouse will claim that the business is not healthy financially and the business is not really worth all that much in the hopes of screwing the other spouse out of his/her true share of the business. On the flip side, the spouse who does not run the business may make an unrealistic demand for his/her share of the business. This is why an independent business valuation is crucial in any divorce case when dealing with a family business. When one spouse does not agree with the value of the business, then he/she can hire their own business valuator. If the case goes to trial, then there will be dueling experts and the value of the business will be decided by the judge taking into consideration the cross valuations of the business.

Disposing the Family Business

Again, valuing a family owned business can be very complicated. How the court assigns the value of the business to the spouses is equally as complicated. The court is to divide property in “just proportions,” meaning that the judge has to divide property, including the value of the family business, equitably. Equitable does not necessarily mean equal or 50/50. It means whatever is fair in the particular facts of the case. One of the factors the court takes into consideration when dividing property is “the contribution of each party to the acquisition, preservation, or increase or decrease in value of the marital or nonmarital property.” 750 ILCS 5/503(d)(1). Many times, the spouse who operates the business will argue that he/she is entitled to a larger percentage of the business because he/she is the one who makes the business profitable. The other spouse will argue that the only reason the spouse can operate the business successfully is because he/she stayed home and took care of the kids and other household chores. Regardless of the arguments being made, a business valuation is an enormous tool when determining the value of the family business.

Securing What Belongs to You

Divorce can be one of the most stressful situations one can endure. If you own a family business with your spouse, determining the value of the business is not only complicated, but also a necessity. You have to make sure that you protect what is rightfully yours. The family business could be the largest asset of the marital estate and, therefore, a business valuation is critical to determine the true value of the business. The knowledgeable and dedicated attorneys at The Taradash Group, P.C. have the experience and leadership necessary to handle even the most complicated aspects of your divorce or family law case. Contact The Taradash Group, P.C. today for a free consultation. Contact us online, or call (312) 775-1020 to speak to an experienced attorney today.