How do I value a business in a Wisconsin divorce?

What happens to a family business in a Wisconsin divorce?   It is rare that both spouses play an active role in managing a family business.  So, the spouse who works in or manages the business is usually awarded the business in the divorce.  However, the business can be the most valuable asset owned by the spouses, so the non-business owner must be compensated for the value.  The difficulty arises in figuring out the value of a family business, because the value cannot be set like the stock price for a public company like Apple.

The first step is usually to gather basic financial information.    At a minimum, we must review a few years of profit statements, balance (asset and debt) statements, and tax returns.  None of these documents, by themselves, tell the whole story of the business income and value.  Tax returns, in particular, have almost no relation to the actual income generated by a Wisconsin business.  Other items that can have a real impact on value are retained earnings, shareholder loans, personal expenses, and cash distributions, among others.

Sometimes the value of a business may be nothing more than the office and business equipment, checking accounts, etc.   This is particularly true for small or service-oriented businesses.  The business can still be valuable, however, if it contains substantial equipment, vehicles, etc.   Some larger business, usually those with goods or inventory, have value in addition to the equipment.   This value is often called “goodwill,” and will usually require a professional appraisal.

Experience gained over years of financial review allows our attorneys to understand these documents and estimate the value and income of a business.   In some cases, an initial estimate may be enough if the business’ structure is simple, or the income clear.  In that case, a full evaluation by a financial professional may be unnecessary, resulting in a real cost savings for the client.

If the business is more complex, we will work with a financial expert to provide a clear value.   However, our attorneys do not simply hand off the task to the evaluator.  Our knowledge allows us to work closely with the evaluator throughout the case, ask the right questions, and maybe most importantly, explain the situation to the client.  If a trial is necessary, we have the ability to relay the information to the judge in an understandable way.  This is an often overlooked skill, since the best expert report is useless unless it is presented clearly to the judge.

Business valuation in a Wisconsin divorce should be handled carefully.   Our attorneys’ experience over many years of business valuation work, ensures that the business asset in your divorce will be awarded accurately and professionally.

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About the Author: David Kowalski

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