How Is a Business Valued During a Rhode Island Divorce?
Property division is often one of the most contentious issues in a Rhode Island divorce. The process becomes even more complex when one or both of the spouses own a business. In many cases, a business is treated as another asset in the marital estate that is subject to equitable division upon divorce. Under Rhode Island law, some of the factors that may influence how a business is treated include:
- When the business was established
- How the business owner received the business interest (i.e. through inheritance or gift)
- Whether the non-owner spouse contributed to the success of the business
Once the parties or the court determine that a business should be included during property division, valuation becomes the key issue. Unlike a car, home or even a prize coin collection, businesses are a complex mix of tangible and intangible assets, including inventory, equipment, bank accounts, intellectual property and good will.
Rhode Island business valuation lawyers generally retain appraisers to accurately assess the value of a business interest. These experts may use one of more of the following methods to determine a fair and appropriate valuation:
- Asset approach — This calculates the fair market value of all tangible and intangible assets and subtracts all legitimate outstanding company liabilities.
- Income approach — This determines a value for the business based on anticipated economic benefits, such as cash flow.
- Market approach — This compares historic sales involving similar businesses to predict how much the company is worth.
Once the experts prepare the reports, you and your spouse can use the information to negotiate an agreement in which the business owner essentially buys out the other spouse’s interest via a cash payment or property settlement. If you cannot resolve the matter, the court will use the same reports and expert testimony to determine a fair value and make an equitable division.
To protect your best interests, it is imperative to work with an experienced attorney who fully understands the process and can advocate strongly on your behalf. At Kirshenbaum Law Associates, we handle even the most complicated business valuation matters.