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How Does Business Valuation in Divorce Work in Massachusetts?

| May 4, 2021 | High Asset Divorce |

Divorce is rarely an easy process. Matters become particularly complex when a couple in Massachusetts share ownership interests in a company. The final division of assets will involve business valuation questions and other issues requiring careful consideration.  

If the individuals going through the divorce cannot agree on the way that the business should be valued and divided amongst themselves, a judge will be charged with making the ultimate decision. This decision is often based on a variety of evidence including testimony presented in court.

Closely-Held Business Valuation in Massachusetts

A closely-held company, which is a small business with a limited number of stockholders, is the type of entity that most frequently comes into question during divorce proceedings. These businesses may be partnerships, corporations, limited liability companies, or simple sole proprietorships. Essentially, a closely-held business is a company that is not publicly traded, so there is no established stock value for valuation purposes.

As divorcing couples present evidence of the company’s value, they often disagree on the numbers that should be used to make the determination. In that case, a judge may order a business valuation be conducted by an independent CPA or other financial professional. 

Evidence Presented to Determine Business Value in Massachusetts

Business valuation may be approached primarily from a consideration of the anticipated income of the company, a comparison with like businesses, or a net value of the company’s assets minus liabilities.  Regardless of the approach used, a family court judge could consider a number of factors before setting a value on the business. These include:

  • The type of business
  • Earning capacity
  • Book value
  • Economic outlook (both of the company and the economy overall)
  • Value of similarly situated businesses
  • Reputation and goodwill of the business

While every business valuation in a divorce looks a bit different, couples can make the process smoother by taking certain steps from the outset. When the parties involved retain qualified experts to undertake an independent business valuation, they can streamline property division and demonstrate a commitment to honesty and fair play.

Partner with an Experienced Law Professional in Massachusetts

It’s never a good idea to leave things to chance. If you and your ex cannot agree on critical terms, it is a good idea to contact a Massachusetts divorce lawyer experienced in handling business valuation issues. Eliminate the stress of conflict. Partner with Koiles Pratt Divorce and Family Law to help reach the right outcome in property division and all aspects of your divorce.