How Does Business Valuation Work In Divorce Cases?

In Minnesota, when divorcing spouses own a business, the value of that business may be considered marital property subject to division during the divorce proceedings. Business valuation is the process of determining the fair market value of a business or business interest.

Here are some key points to consider regarding business valuation in divorces in Minnesota:

  • Expert Opinion: Business valuation typically requires the expertise of a professional such as a business appraiser or forensic accountant who specializes in business valuations. The court may appoint a neutral expert or each spouse may hire their own expert to assess the value.
  • Standard of Value: Minnesota uses the “fair market value” standard when valuing a business. Fair market value is the price at which a willing buyer and willing seller, both having reasonable knowledge of the relevant facts, would agree to complete the transaction.
  • Valuation Methods: Various approaches can be used to determine the value of a business, including the income approach, market approach, and asset-based approach. The specific method used depends on the nature of the business and the available financial information.
  • Financial Statements: Financial statements, tax returns, and other relevant documents are typically required for the valuation process. These documents help assess the business’s assets, liabilities, cash flow, profitability, and growth prospects.
  • Goodwill and Intangible Assets: In many businesses, a significant portion of value lies in intangible assets like goodwill, reputation, or intellectual property. Evaluating and assigning a value to these intangible assets can be complex and may require expert analysis.
  • Discounts and Premiums: Depending on the circumstances, discounts or premiums may be applied to the business value. For example, a discount for lack of marketability may be considered if the business interest is not easily sold or transferred.
  • Consideration of Other Factors: The court may consider other factors, such as the extent of each spouse’s involvement in the business, the business’s historical performance, economic conditions, and any potential risks or future prospects.

It’s important to note that divorce laws can vary, and the specific rules and procedures for business valuation may differ depending on the individual case and the court’s discretion. Consulting with a qualified family law attorney in Minnesota will provide you with the most accurate and up-to-date information regarding business valuation in a divorce.