If you and your spouse are going through a divorce and you own a business together, you may be wondering what you should do with it. The first thing is to find out how much it is worth.
Once you know the company’s value, you can make a more informed decision about its fate.
Methods to value a business
According to the U.S. Chamber of Commerce, there are three main ways to determine a business’s value, although some owners will use a combination of methods. One approach is market value. In this approach, you would look at similar businesses that have sold and use those amounts as a guide.
The asset-based approach determines a company’s value based on calculating its assets and subtracting its liabilities. You can go by book value or liquidation value.
The third approach is earning value. This method calculates the ability of the company to produce future wealth.
Options for the owners of the company
According to Market Business News, one option is to keep the business and continue to operate it as partners. If working in person together does not seem feasible, you can be creative. You can work different days, or you both have 50% interest, but one partner is silent and does not participate in daily operations.
If you want nothing to do with your spouse, you both may choose to sell the company and split the profits evenly. A third option is for one of you to buy the other partner out and own 100% of the company. There is also an option of having one of you sell your part of the company to another individual who will become a new partner.
As you decide what to do about your company, keep in mind how your choice may affect how the court decides on other marital property divisions.