Business valuation is an important task and skill, constituting both an art and a science, as a recent article in The Lane Report noted. Business valuation could be called a science because it involves precise knowledge about how to accurately calculate the value of a business. It could also be called an art, though, because there is no set way to do it, and it usually involves some degree of skillfulness based on experience regarding the most appropriate way to approach valuation.
There are a variety of reasons why a businessperson might seek out a business valuation, including estate planning, retirement, merger or acquisition, or litigation. Another reason might be divorce. In divorce, business assets which are deemed to be marital are subject to division, and courts need to know exactly what a business is worth in order to determine property awards.
Because business owners can lose a lot in divorce, it is important for them to think about protecting their business prior to marriage. For those who are entering marriage with significant business assets, a prenuptial agreement can be an excellent way to do this. For those who are already married, it may not be too late to establish a marital agreement laying out some of the terms of property division.
They key with any marital agreement, whether entered into prior to marriage or during marriage, is that it is negotiated in accordance with the principles of state law and properly executed. Working with an experienced attorney is, therefore, important when putting any such agreement together.
In our next post, we'll look at some of the issues that can arise with business valuation in divorce.
Source: The Lane Report, "Business valuation is science and art," Greg Paeth, Oct. 16, 2014.