During a couple's marriage, they may start a business, either together or separately. If the couple chooses to get a divorce, they must address how ownership of this business will be handled. As with other assets, interests in a family business must be addressed as part of the equitable distribution of marital property. To ensure that business interests are divided fairly, a business valuation may need to be performed to determine the actual value of business assets. There are various approaches to this process, so it is important to understand the differences to determine which one is appropriate for your company.
Business Valuation Methods
Multiple methods can be used to estimate how much a business is worth. One way of determining a business's value is by looking at the assets owned by the business. An asset-based approach is often better for larger companies that have business assets separate from the owners' personal assets. In smaller companies, a person's personal and business funds often overlap, which can make this approach more difficult. There are two asset-based valuation approaches that are typically used by business valuators: going concern, in which a business's liabilities are subtracted from the net balance of its assets, and liquidation, which looks at the potential profits earned by selling off all of the business's assets.
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