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Should you update your business valuation during a divorce?

On Behalf of | Dec 13, 2023 | blog, Divorce |

Divorce is a complex process, especially when it involves the division of assets. When a business is part of the equation, things can get even trickier.

Business valuations during a divorce, however, are not the same as valuations for selling. Having an accurate valuation can ensure fairness during asset division, so you should consider updating your business valuation during a divorce.

Dynamic nature of businesses

Businesses are dynamic entities. Their value can fluctuate due to various factors such as market trends, economic conditions and internal changes. Unlike a static valuation for selling, which you may not revisit until a potential buyer emerges, a divorce may take months or even years. During this time, the business environment can evolve significantly. Updating the valuation ensures that both parties have an accurate reflection of the business’s worth at the time of the divorce.

Protecting your interests

A divorce settlement typically involves dividing assets equitably. If your business has experienced changes since the initial valuation, failing to update it could lead to an unfair distribution of assets. Whether the business has expanded or faced challenges, consider these factors to ensure a fair and just resolution.

Legal requirements

Courts often require a detailed financial disclosure during divorce proceedings. Failing to update your business valuation can be an example of a lack of financial transparency. Providing an outdated valuation could result in legal complications and may affect the credibility of your financial disclosures.

Statistics suggest that the divorce rate is higher for entrepreneurs compared to other individuals, ranging from 43 to 48%. This means that, as a business owner, keeping an up-to-date business valuation can help you protect your interests during uncertain times.