Photo of Professionals at Weinberg, Kaplan & Smith, P.A.
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Placing a value on the family business

by | Dec 15, 2017 | High Asset Divorce

Many New Jersey residents own their own businesses or have a share of ownership in a family business. If successful, these business interests can be a source of a great deal of wealth and income for a Marlton couple, especially if they both are involved in running the business.

However, it is always important for both members of the couple to keep in mind how to estimate the value of the business in the event of a life-changing circumstance. A life-changing event could include the complex asset division involved in a high asset divorce, but it also could include other things like the death of one of the spouses or unforeseen economic problems.

Ultimately, the value of a business is what another party is willing to pay for it on the open market. The second best way to determine the true value of a business is to hire an accountant or business evaluator to give an opinion on the company’s value. If this expert is going to be giving an opinion that could be contested in a legal proceeding, it’s a good idea to have one’s attorney involved in choosing him or her.

Still, there are many ways a person can estimate the value of a family business, and it is often a good idea to do so. As these sorts of businesses rarely if ever trade their stock to the general public, there’s always a little guesswork involved in determining the value.

Basically, estimating a business’s value involves thinking of the business as an income supply that can ebb and flow depending on the circumstances.

So, the question one has to ask is how much he or she would pay right now for the ability to earn an average of $100,000 a year in the foreseeable future. It is important when making this estimate to determine what counts as “income;” for example, is it all of the business’s revenue, or is it just profit?

Putting a value on the family business can be a complicated affair in a divorce or even another, unrelated legal proceeding. For this reason, it’s generally a good idea to get the help of both quality legal counsel and qualified experts.