A Divorce Lawyer Fairfax VA Trusts Explains Business Asset Valuation in a Divorce
As a divorce lawyer in Fairfax, VA at May Law, LLP may tell you, 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 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 with help from a divorce lawyer in Fairfax, 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 a 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 reference for determining the economic value of a business.
Other Financial Considerations During Divorce
Divorce in itself can be painful, costly, and take many months to finally finalize. The couples are likely to have to talk about custody of children, how to split up shared property, and much more. Alimony can be a heated topic to negotiate, as the process of divorce can be expensive — so rarely does one spouse openly offer to financially support the other. However, in order to avoid court, each couple does have to come to a middle ground over very sensitive issues like who is to pay into alimony, in what amount, and for how long. It is encouraged that those going through divorce obtain legal representation for guidance along the way.
If you have chosen to work things out directly with your spouse, then it can help to have a Fairfax divorce lawyer in VA as a way to protect yourself. During a legal consultation, we can answer questions that you may have along the way.
Start By Evaluating Your Financial Situation
You cannot begin to effectively and accurately negotiate over alimony terms, unless you have truly visited what your financial situation looks like. Many people have a general idea of how much they make per year, but when it comes to calculating alimony you will want to be as exact as possible. Begin by creating a file for all of your financial-related paperwork. For example, gather paycheck stubs, tax documents, receipts for bills, extra bonuses per year, and anything else relevant.
It is imperative to know how much you make per year, how much you spend per year in necessary living expenses, and the amount of debt you currently have. By having this knowledge to begin with, you have a better idea of how much you require in monetary support or how much you can reasonably offer your spouse financially.
Try to Keep Emotions Out of It
A Virginia divorce lawyer in Fairfax understands that this is perhaps much easier said than actually done, as divorce is likely to stir up various intense emotions throughout the way. But, in order to effectively arrive at a resolution over alimony, both spouses have to aside their emotions. All parties in the negotiation, including your respective attorneys and mediator, understand that this is probably an emotionally difficult time for you. If meeting in-person over mediation is too triggering, then both attorneys can negotiate back and forth for you instead.
Maintain Realistic Expectations
The laws pertaining to divorce and alimony vary by state. So, it is important that you get information from your attorney about how these laws may impact how much you pay or receive in alimony. Sometimes, emotions get in the way and we are unable to maintain realistic expectations regarding the situation at hand. By focusing on the factual numbers of your financial situation and state laws, it can help you understand what a fair alimony resolution may look like in the end. If negotiating is unsuccessful, then both spouses are going to have to attend court for a resolution of the matter by a family court judge instead.
Be Wary of Being Taken Advantage Of
Divorce can be an undoubtedly stressful thing to endure, and can easily bring out the worst in people. Unfortunately, many spouses view divorce as a way to seek revenge towards their partner, by trying to get as much in money and assets into their hands as possible. A spouse that doesn’t receive assistance from an attorney and understand his or her rights, may be vulnerable to being taken advantage of during the divorce process.
Focus on Financial Negotiations
Divorcing spouses may want to take out their pain on the other person, but it is crucial that you remain focused on the financial negotiation at hand. The costs for legal fees, court hearings, and paperwork can add up quickly. The longer it takes for agreements to be reached, the more costly it can get. So, VA divorce lawyer at May Law, LLP may recommend that their client doesn’t stress too much over the little things like non-sentimental items, furniture, or other belongings that can be replaced. Financially savvy spouses going through divorce know when to pick their battles.
Prepare For Divorce Even Before Filing
Once divorce has been officially filed by one spouse or the other, things are bound to get ugly and tense fast. If you anticipate a divorce is approaching but hasn’t been petitioned quite yet, that may be the right time to make certain preparations. Start organizing a file of important financial documentation, account statements, photographs of assets, and anything else of worth that you wish to keep. By preparing early, it can help you come out ahead in divorce court later on.
Don’t Try to Conceal Assets
One of the main concerns many spouses have about divorce, is whether they will get to keep the assets they want the most. Despite this fear, it is vital to be open and honest about what you own. By intentionally deceiving your spouse through hiding assets, you may be coming close to violating state laws and risking your credibility in court. It is advisable that spouses who are concerned about losing favored assets, talk with a Fairfax, VA divorce lawyer for advice and strategy. There may be harsh penalties for such deception, and could work against you when in front of the divorce court judge, even though you were simply trying to protect yourself.
Be Open and Flexible During Mediation
It doesn’t come as a surprise to many people to hear just how expensive divorce can be. If the spouses are willing to talk amongst each other, they can save a hefty chunk of change. A mediator is a neutral third party who can facilitate a conversation with each spouse present, in hopes that they can arrive at an agreement for divorce terms. This can be a resourceful way for parting couples to save money in legal bills and avoid attending court, where a judge may have to determine the outcome. It can benefit both spouses if they can compromise during mediation, so at least some of their wishes can be part of the resolution.
We can help you with all aspects of your divorce and ensure your rights and interests will be fully protected. If you have decided to end your marriage and anticipate issues over how your family business or finances in general will be affected by a divorce, then contact May Law, LLP today to set up a consultation with a divorce lawyer in Fairfax, VA right away.