With ever-changing economic conditions, one of the biggest challenges that divorcing
spouses face is valuing their business. This is a particularly large challenge for spouses
who don't realize that even if a business is in the name of just one spouse, it will be
considered marital (and therefore belonging to both spouses) if it was purchased,
improved on, or financed somehow during the marriage.
Indeed, since many businesses (especially small ones) qualify for one or all of these
criteria, the issue of business valuation takes a front and center role during financial
settlement negotiations and possible litigation.
The Risks of Improper Business Valuation
Considering how important finances are to quality of life, the risks of improper
business valuation can be severe and devastating. And it's not just incompetent advice
that can be costly; spouses can contribute to the problem, too. For example, the spouse
who wasn't actively involved in the business may accept, without question, the business
valuation estimate provided by the other spouse -- and this estimate can be staggeringly
off-base (and, of course, in the estimating spouses favour).
Why does this happen? Unfortunately, it's often because the spouse receiving the
estimate either doesn't know that they have every right to seek an independent business
valuation, or they believe such a valuation would be too costly. Without question, in the
overall sense, the costs of independent business valuation are a fraction of what could
be lost or gained.
Your Family Lawyer May not Have the Expertise to Help You
Your family lawyer is a critical part of your Divorce team (a.k.a. the professionals
who will help you through your Divorce). However, business valuation may simply be outside
his or her area of expertise.
Cathleen Collinsworth is a Master Analyst in Financial Forensics (MAFF™) specializing in Business Valuation in Litigation, and will
work with you and your family lawyer to create a precise, concise and objective business
valuation -- one that ensures your Divorce financial settlement agreement reflects the real
value of your business, and not merely your spouses "estimate."
Cathleen is also a Certified Divorce Financial Analyst (CDFA), a MAFF™, and is qualified to provide expert witness testimony.