A Divorce Lawyer Fairfax VA Trusts Explains Business Asset Valuation in a Divorce

Divorce Lawyer Fairfax VA

Business asset valuation is the process of determining a monetary amount that best reflects the value of a business. Business valuation is important in quite a few situations. Business valuation is often required when one seeks to sell their business so that potential buyers understand the value of the business they are considering purchasing. This valuation, in turn, assists the owner in determining a fair sale amount for their business.

Business valuation can also play a big role in a Fairfax VA divorce. When divorce occurs, a couple’s assets are divided between both parties. Thus, business valuation in divorces allows the court to understand how much an important economic asset of a divorcing couple is worth, in order to determine how the business and other assets will be dispersed amongst the spouses. As a divorce lawyer can explain, business valuation in a divorce can also be used in determining alimony payments. Business valuation can also play a very important role in estate tax issues and bankruptcy proceedings.

The Different Methods of Business Valuation

Business valuation methods can vary based on the type of business, the goal/use that the valuation is made for, and the method preferences of a valuator. However, there are three commonly utilized methods for valuing a business. First is the asset method, which seeks to answer the question of how much money would be paid for all of the different assets that make up the business. The asset method requires an evaluator to compile a complete list of all a business’s assets, such as real property, equipment, stocks, or other security instruments that are outright owned by the business. After tallying the financial value of all the assets, the business’s liabilities (ie. debts owed, etc.) are subtracted from the amount in order to receive an asset-based business value.

The second business valuation method is the income method, which seeks to determine the present value of a business’s likely future returns. The income method utilizes the discounted cash flow approach in order to provide sound estimates of future cash flows. From there the total estimated amount of future cash flow is then discounted (i.e. reduced/increased at a rate that could be based on potential inflation or some other capitalization multiplier). The income method is essentially the capitalization of the earnings of a business in order to give an idea of what revenue can be expected in the future.

The third business valuation is the market method, which looks to the value that market actors have placed on comparable businesses that deal in the same goods and services as the business that is the subject of the valuation. This style of valuation is best used in arms-length negotiations where detailed information about the business’s balance sheets and assets have not been provided. Relevant data utilized in the market method include data about other comparable companies and information about past transactions of a similar nature, which are used as points of references for determining the economic value of a business.

Contact a Divorce Lawyer for Assistance

Have you decided to end your marriage and anticipate issues over how your family business will be affected by a divorce? Contact May Law, LLP today to set up a consultation with a divorce lawyer Fairfax VA clients recommend. We can help you with all aspects of your divorce and ensure your rights and interests will be fully protected.

FAQ: What Is Divorce Discovery?

In the early stages, your divorce lawyer in Fairfax, VA may make reference to “divorce discovery” as part of the process for terminating your marriage. Divorce discovery is a common legal method used for the purpose of collecting information about one or both of the divorce parties. Your Fairfax, VA divorce lawyer from May Law, LCC can use this method to help build your case and prepare for negotiations with your spouse’s divorce lawyer regarding terms of the divorce.

What is the process for divorce discovery?

Your divorce lawyer in Fairfax, VA from May Law, LLP can provide more detailed information tailored specifically to your circumstances. However, the following steps are typical in a divorce proceeding:

  1.       Disclosure. Your Fairfax, VA divorce lawyer and your spouse’s divorce lawyer submit requests to each other for specific information related to the divorce case. Each side has 30 days in which to respond to each request.
  2.       Interrogatory. This refers to the list of questions that your divorce lawyer submits to your spouse’s divorce lawyer, and to the list they submit to your lawyer.
  3.       Admissions of facts. This refers to the list of facts that your Fairfax, VA divorce lawyer and your spouse’s divorce lawyer submit to each other for verification or denial.
  4.       Request for production. Your divorce lawyer and your spouse’s divorce lawyer submit requests to each other for specific documentation that they feel is relevant to the divorce proceeding. Each side will have 30 days to respond with the requested information. Examples of documents that are often requested include these:
  5.       Bank statements
  6.      Proof of all sources of income and the amount of earnings from each
  7.       List of assets and their values
  8.       Depositions. During this part of the process, your divorce lawyer may take sworn testimony known as a deposition from your spouse and any other witnesses or persons relevant to the divorce. The same is also true of your spouse’s divorce lawyer who may wish to take your sworn testimony as well. Depositions are similar to be called to the stand during courtroom litigation. Anything you say in a deposition can be raised in court as if you said it while on the witness stand.
  9.       Mediation. In an effort to avoid divorce court, you and your spouse may choose to enter into mediation to come to agreement on the terms of the divorce. Mediation is overseen by a professional third-party mediator although your divorce lawyer can be present.
  10.       Divorce court. If mediation is unsuccessful, your Fairfax, VA divorce lawyer will take your case to divorce court. In court, your lawyer and your spouse’s divorce lawyer will present their cases to the Judge. The Judge will review all of the information presented by both sides, including that which was revealed during discovery. Sometime after the proceeding concludes, the Judge will make their ruling on the various aspects of the divorce, and any decisions the Judge makes will be legally binding. You will then be divorced.

If you are considering terminating your marriage, protect your best interests by contacting a divorce lawyer Fairfax, VA trusts from May Law, LLP and request a free consultation.