Denver Business Valuation Lawyer

A business is worth more than the building itself and the value of the goods and property associated with it. Loyal customers, good will, and years of hard work can all influence the value of a business. At The Law Offices of Rodger C. Daley and Associates, our Denver divorce attorneys understand the importance of accuracy in putting a value on a business that is subject to division or allocation in a divorce. No matter where you are in Colorado, we can assist you.

How To Value Your Business For Asset Division

Our lawyers work closely with commercial real estate appraisers and forensic accountants to determine the value of businesses. When representing divorce clients who own businesses, we do everything possible to minimize the impact to the business by dividing the estate without adversely affecting the ongoing business operation.

Dividing a family business may seem like a difficult task, but in reality, it is often simply a matter of creative and ardent negotiation. In effect, most cases that involve family businesses can be resolved through settlement.

A common misconception is that owning a business or businesses with your spouse means divorce is impossible. This is simply not true. Our lawyers have the knowledge and experience to help you navigate the emotional and legal aspects of divorce so that you – and the business – can move forward.

Different Approaches to Valuing a Business During a Divorce

Valuing a business during a divorce can be approached through three primary methods: asset-based, market-based, and income-based. For instance:

• Asset-based: The asset-based approach focuses on the company’s net asset value by subtracting liabilities from the total assets. It is a straightforward method, but it may not fully capture the business’s earning potential.
• Market-based: The market-based approach evaluates the business by comparing it to similar businesses that have been sold recently. This method considers current market conditions and provides a realistic valuation based on what buyers are willing to pay.
• Income-based: The income-based approach, often regarded as the most comprehensive, calculates the business’s value based on its projected income. This involves projecting potential earnings in the future. Then, they are discounted to present-day value. This offers a clear picture of the business’s financial health and potential profitability.

Each method has its merits, and choosing the right one depends on the specific circumstances of the business and the divorce.

Business Assets Involved During a Business Valuation in a Divorce

When valuing a business during a divorce, you must consider several key assets:

• Family and closely held businesses: These are often privately owned businesses where ownership is restricted to family members or a small group of shareholders. The valuation of these businesses is crucial as they may represent a significant portion of marital wealth.
• Income generated from business: This includes all revenue streams the business produces. Evaluating this income is essential for understanding the business’s profitability and future earning potential.
• Commercial real estate: Properties owned by the business, such as office buildings, warehouses, or retail spaces, must be appraised. These assets can significantly impact the overall value of the business.
• Other business property: This category includes tangible assets like vehicles, machinery, equipment, and inventory. These items contribute to the operational capacity and overall value of the business.

Each of these assets plays a critical role in forming a comprehensive and accurate business valuation during a divorce.

Frequently Asked Questions About Valuating A Business In A Divorce

At The Law Offices of Rodger C. Daley and Associates, we know you may have questions about the business valuation process. We are here to help, so here are a few we see most often:

What is a business valuation?

Also called a company valuation, this is just the process of determining what the company is worth. If it were sold on the open market, what would the buyer’s value be? It is very important to settle on an accurate figure.

How do you calculate the value of a business in a divorce?

Numerous tactics can be used. Looking at comps of other businesses that have recently sold is one tactic, for instance. Another is considering all of the tangible assets and real estate the business owns, including product inventory. Yet another is considering the yearly earnings and future earnings projections. Often, a combination of these tactics will be used.

What types of business entities can be appraised?

Any type of business can go through the appraisal and valuation process. Examples include S corporations, C corporations, business partnerships, sole proprietorships, limited liability partnerships (LLPs) and limited liability companies (LLCs).

Who conducts business valuations for divorces?

Business owners will certainly be involved, but they often need to seek assistance from an outside source who does not have a stake in the division of assets. This means bringing on a professional appraiser, who will do the valuation using a combination of tactics.

Why work with an attorney for a business valuation?

A business is likely one of the most expensive assets a couple owns, and the way it is divided can drastically impact its viability moving forward. With so much on the line, it is crucial to have experienced legal guidance. An attorney can help identify a professional appraiser, provide necessary information and documentation about the business, get a second opinion if needed, consider the valuation in the context of asset division and much more. This is a complex process, and the outcome needs to be correct, so having someone with experience and legal knowledge leading the way can be highly beneficial.

Contact The Law Offices of Rodger C. Daley and Associates

With over 30 years of experience in this area of the law, our Denver business valuation attorneys are aware of the complications that can arise, and know how to resolve them. When necessary, we offer evening and weekend appointments. Contact our office in Denver, Colorado, at 720-773-5708.