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How Is My Husband’s Business or My Wife’s Business Valued as Part of the Divorce?

In the Commonwealth of Virginia, businesses can be considered marital property whether they were started before or during the marriage. In other cases, a company may comprise marital, hybrid and separate property. Courts in Virginia have the authority to divide joint marital assets if a couple cannot agree on how to divide the assets themselves.

Figuring out the value of your partner’s business can be more complicated than determining the value of other assets, such as your house or vehicle. It is crucial to consult with an experienced Virginia divorce attorney. Your lawyer will advocate for your interests and defend your right to any joint property you share with your spouse, including a family business.

How Is a Business Valued in a Divorce?

To determine the value of your spouse’s business during the divorce, several factors must be taken into account:

  • Tangible assets
  • Intangible property
  • Liabilities
  • Profits

One of the first steps in valuing the business will involve an inventory of all the business’s tangible assets. This includes virtually all assets with monetary value owned by the business. The inventory will consist of physical property owned by the company and cash assets in bank accounts. For instance, if the business uses specific equipment to manufacture products, that equipment would be considered tangible property, as would office supplies, in-stock items, and even the building that houses the business.

Any liabilities that the business has must also be considered. For instance, if your spouse runs a business inside a rented building, you must consider the rental lease. Lines of credit and services the company regularly pays for also count as liabilities.

Intangible assets are more difficult to quantify because they do not have a specific monetary value. Still, they’re a critical part of the equation when calculating the business’s total value. Intangible assets include the owner’s goodwill, which involves the business’s customer relations and community service. The appraiser will also examine how the business’s current and prospective customers view the company.

The final factor involved in the valuation process is tabulating the business’s profits. To determine the company’s revenue, a qualified appraiser must comprehensively review the business’s finances.

How Businesses Are Divided

You might think that because your spouse ran the business, they are entitled to retain most or all of the company. But courts in Virginia use an equitable distribution model when dividing marital property, including businesses. Equitable distribution does not mean that you and your spouse will split marital property 50/50, but it does mean that the court must divide property in a way that is fair to both parties.

Depending on numerous factors, including your role in the business and contributions to your spouse’s company, the court could award you a share of the business. Suppose you did not play any role in the running or operating of the business. In that case, the court could award the business to your spouse, but award you other types of marital property to offset the company’s value.

Contact a Vienna Divorce Attorney

If you are going through a divorce in Virginia, you have a right to retain a fair share of the marital property, including a family business. In addition to your home and any real estate you own, businesses can be one of the most significant assets to consider during property division.

At ROOP XANTTOPOULOS BABOUNAKIS & KLAM PLLC, our Vienna, VA, divorce lawyers can ensure that you get an accurate business valuation, help you navigate the process of property division, and protect your rights. Contact us by phone or online for a confidential consultation with a knowledgeable member of our team.

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