Business Valuation in Divorce: Guidance from a Newburyport Divorce Attorney
At Turco Legal, we understand that divorce involving business ownership presents unique challenges. Our Newburyport divorce attorneys have extensive experience handling high-net-worth cases, including those where a business or business interest is part of the marital estate. A thorough business valuation is essential to ensure a fair and informed division of assets. Here, we outline the key aspects of business valuation in divorce and its role in protecting your financial interests.
Understanding Business Valuation
If you or your spouse owns a business, determining its value is a critical step in the divorce process. The Corporate Finance Institute defines business valuation as the “process of determining the present value of a company.” Unlike traditional assets, businesses—particularly privately held ones—can be complex to evaluate. A proper assessment considers tangible assets, intangible property, and liabilities. Several recognized approaches may be used, including:
- Income Value Approach: Businesses in Massachusetts are commonly valued using the income approach. You may also hear this approach referred to as a discounted cash-flow analysis. In effect, a company’s current income (cash flow) and projected future income will be analyzed to determine the appropriate value of the business.
- Asset Value Approach: While less commonly used to value businesses in Massachusetts, the asset approach makes sense in certain circumstances. Instead of focusing on cash flow, the asset approach focuses on the value of the business’ assets (both tangible and intangible) and the liabilities of the company.
- Market Value Approach: A third methodology for the valuation of a business in Massachusetts is the market approach. With this valuation method, the value of a business is determined by assessing how much it could be sold on the open market.
Why Business Valuation Matters in Divorce
In Massachusetts, businesses are often considered marital property subject to equitable distribution. This does not necessarily mean an equal split but rather a division deemed fair under the circumstances. To reach an equitable resolution, a precise business valuation is essential. Whether you or your spouse owns the company, knowing its value—and being able to substantiate that value—ensures that your financial interests are properly represented.
The Role of Forensic Accountants in Business Valuation
Business valuations in divorce are often conducted by forensic accountants—financial professionals who specialize in analyzing business records, cash flow, and potential discrepancies. Depending on the circumstances, each party may retain their own forensic accountant, or both may agree on a neutral expert to conduct a joint valuation.
Protecting Your Business in Divorce
Divorce can pose a risk for businesses—especially for small companies and closely held corporations. It is crucial that you develop a proactive strategy to protect your business, protect your personal financial interests, and put your company in the best position to get through the divorce process. At Turco Legal, we help business owners navigate the complexities of divorce with a focus on safeguarding assets and securing fair outcomes.
How Turco Legal Can Assist
If you or your spouse owns a business, our attorneys can provide the legal and financial insight needed to protect your interests. When you work with us, we will:
Explain the business valuation process and how it applies to your case.
Review and analyze financial and business records to ensure an accurate assessment.
Collaborate with forensic accountants and other experts as needed.
Develop a strategic approach to secure the best possible outcome.
Consult a Newburyport Divorce Attorney
At Turco Legal, we combine legal experience with financial acumen to guide business owners through the divorce process. If you have questions about business valuation or need experienced representation, we are here to help. Contact our Newburyport office at (978) 225-9030 for a confidential consultation. We serve clients throughout Essex County and northeastern Massachusetts.