Big Divorce Mistake #9: Not Getting a Business Valuation to Save Money

Often, businesses are the most valuable asset in a marital estate. Only appropriately credentialed professionals are qualified to issue an opinion as to fair market value for this marital asset. In a divorce before a marital estate is divided, assets must be identified, classified (marital or separate), and valued.  To learn more, see Business Valuation in Tennessee Divorce Law.

The Forensic Accounting Deskbook by Miles Mason, Sr. JD, CPA, published by the ABA Family Law Section

For a much more detailed discussion, see The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, Second Edition, authored by Miles Mason, Sr. and published by the ABA Family Law Section.  This updated edition of one the ABA’s most popular resources explains the practice of forensic accounting and business valuation and how to apply it in family law cases. It provides a practice-focused introduction to the core financial concepts in divorce, such as asset identification, classification, and valuation, income determination, expenses, and more.

See Mason’s complete list of the 10 Big Divorce Financial Mistakes.

VIDEO TRANSCRIPT:

Tracy Coenen:             Can you tell us more about what a business valuation is, and why it’s so important or necessary in a divorce filing?

Miles Mason:              Just to begin with, in order to divide a marital estate, we’ve got to identify assets, classify and value them. There’s no real way to value a business without a business valuation expert or business appraiser. There’s just no other way to do it. Sure, there are some businesses that are so small that they probably don’t have any independent value, like a lawn care service. There may be some value in a customer list or something, but not really. I mean, you’ve got your equipment there, a couple of lawn mowers, maybe a truck or two. Is there real value there? Probably not going to justify a five to ten-thousand-dollar business valuation by two separate experts.

But once you talk about meaningful businesses, there’s no other way to do it, and there’s no other way to get information or get admissible testimony in about it. Now, parties can testify to the value of the assets they own. A business owner could offer testimony, but business owners just don’t know unless they’ve had it valued. So it’s just very, very important to have a business valuation done by a competent business valuation appraiser or expert witness.

Thank you to Tracy Coenen, CPA, CFF for inviting me to join her in this video series. Tracy is a nationally recognized forensic accountant practicing in Milwaukee and Chicago.