Business Valuations In a Hackensack Divorce

Part or all of any business the spouses own or have an interest in are generally considered marital property that may be divided in the divorce process. It is essential that any business interests be properly valued to determine exactly how much stands to be divided. Thus, divorces involving business assets can be particularly complicated. You should hire a property division lawyer who understands the valuation process. Contact one of our divorce attorneys at Moskowitz Law Group for help with business valuations in a Hackensack divorce.

What Is the Importance of a Business Valuation?

An accurate assessment of a business’s value is the foundation of the property division process when it comes to businesses. When business interests generate marital income and assets, it is crucial to ensure accurate valuation.

You need a precise assessment of a Hackensack business’s value because New Jersey’s divorce laws regarding the division of any kind of marital property are based on equitable distribution. This means each spouse gets a fair share of assets, but not necessarily an equal share. You must know the total value of a marital estate before you can fairly and equitably divide all marital property, including business interests.

Valuation Methods

There are several methods for determining a business’s value in Hackensack divorce cases. The process that works best depends on the type of business, its industry, and the financial information available to you.

Asset Approach

This approach considers the fair market value of everything the business owns, tangible and intangible, as well as what it owes. It is suited for companies with significant tangible assets, such as real estate, inventories, or equipment. It is also suited for companies that have had a substantial downturn in business that may have to be sold or restructured. It is not suited for companies that primarily offer services that do not require substantial equipment, rather than buying and selling goods or real property.

Income Approach

This approach focuses on determining what the company’s future income will likely be and determining what that projected income is worth today. This approach is suited for businesses that are doing well, especially those in the service industry and professional practices such as medical, dental, or accounting practices.

Market Approach

This approach determines the fair market value of the business if it were hypothetically sold by comparing it to similar businesses that have been sold in the recent past. This approach is suited for businesses where there are many other similar businesses being bought and sold. Extremely unique or niche businesses are not suited for this approach because it would be difficult, or even impossible, to obtain information regarding what similar businesses have sold for..

Key Factors Affecting Valuation

Several factors can influence the valuation of a business in a Hackensack divorce. These include:

• Industry trends and forecasts
• Overall economic conditions
• The management team’s capabilities
• Goodwill and intangible aspects, such as reputation and customer relationships

The Court draws a distinction between personal goodwill and enterprise goodwill. Personal goodwill is tied to the owner’s reputation and skill. Enterprise goodwill is tied to the business itself. Usually, only enterprise goodwill is considered marital property.

The Valuation Process

Getting your business assessed in a Hackensack divorce typically involves a forensic accountant specializing in business valuations. They will review documents like tax returns, financial statements, bank statements, credit card statements, inventories, client lists, and operating agreements. They will also go see the business place itself and interview the business owner and any managers to learn more about the business than what can be ascertained from documents. The forensic account will then analyze the data they gathered and apply one or more of the appropriate approaches to determine a specific value or range of values for the business. They will set forth their findings in a comprehensive report that explains their approach and the data they collected. The report will also show their calculations and provide their opinion of the value of the business. Sometimes, the forensic accountant may need to provide testimony in court to further explain their findings.

Ask a Hackensack Divorce Lawyer About the Value of Your Business

Business valuations in a Hackensack divorce can be complicated and often require qualified professionals to perform them. Contact Moskowitz Law Group today to speak with one of our experienced divorce attorneys. We have a network of reputable valuation specialists to ensure a fair and accurate valuation of a business.