Why You Need to Value the Family Business

  • May 30 2018

Child custody, spousal support, and property division, are usually the most heated and aggressively contested issues in a divorce. For many couples, real estate, investment accounts, and retirement accounts constitute their most valuable assets.  Placing values on these assets may be a simple as reviewing the most recent statement or obtaining a current appraisal.

However, when a family business is involved, the valuation process can be much more difficult. Because spouses or other family members may play unfair games, you want a financially neutral party involved in valuing the business. Our Illinois property division lawyer can help you locate an independent business valuator who can provide an unbiased value for the family business.

Valuing the Family Business in a Divorce

Unfortunately, family members may not disclose information about the business that is required to calculate a correct value for the business. It most cases it will be necessary to engage in discovery to force the other spouse to disclose the information necessary to properly value the family business.  It is critical that a family business is valued correctly, so that the property division agreement or order is fair and equitable to both spouses.

In some cases, a spouse’s family members may also own an interest in the business. Therefore, it may be in their best interest to calculate a low value for the business to prevent the other spouse from receiving a larger interest in the family business.  In other cases, family members may not want to liquidate business assets to pay a spouse for his or her interest in the business.

On the other hand, the spouse who does not operate the business or have any real interest in the business may claim a higher value for the company as leverage to obtain other assets. In either case, before a court hearing, it is in the best interest of both parties to ensure the business is valued correctly. If the judge uses an incorrect value for the business, the marital assets may not be equitably divided between the spouses.

Hiring a Professional to Ensure Equitable Division of the Family Business

In combative divorce cases, our Illinois property division lawyer often retains the services of an independent professional to appraise the family business. The other party may also hire a professional or expert to value the business. If so, a judge must review the valuations of both independent business appraisers and listen to the testimony offered by both parties to determine the exact value for the family business.

After determining the value of the business, the judge can then assign each spouse a specific amount based on an equitable distribution of assets. In Illinois, “equitable” does not necessarily mean equal. Equitable means “fair” based on the facts of the specific case. Therefore, the judge will view the case in its entirety to determine how much each spouse should receive for his or her interest in a family business. It may be that the entire family business is awarded to one spouse and the other spouse receives sufficient offsetting assets from the remainder of the marital estate.

A judge may consider several factors, including who operates the business and whether one spouse stays at home to care for children to allow the other spouse to work. Regardless of the facts in a case, the first step is to ensure you have an accurate value for the family business before arguing about how much you should receive in a property division.

Work with An Illinois Property Division Lawyer to Protect Your Interest in A Family Business

If you are contemplating a divorce, contact our Illinois property division lawyers to discuss how you can protect your interest in marital property, including a family business.

Posted in: Divorce