If you and your spouse are going through a divorce, and you also own a business together, you have some important decisions to make. Assuming that an agreement for the division of the business is not in a pre-or postnuptial agreement, the two of you need to decide what steps you want to take.
There are generally three options for the fate of the business. To help guide your decision-making process, you need to get a realistic idea of how much the business is worth.
Options for the business division
According to Market Business News, one of the cleanest ways to deal with the business is to sell the entire thing to a third party. This allows both of you to split the profits and move on.
If one of you wants to keep the business, the other partner can sell his or her share, and the other is the sole owner. If the person keeping the business cannot afford to pay for the other half of the business, he or she may choose to take on a new partner.
A third option is to keep the business and continue to run it as partner. This generally requires that you and your ex get along and can make decisions without emotions getting in the way.
Common methods used to valuate a business
Before making a decision, you should know how much the business is worth, so you know what to expect. According to the U.S. Chamber of Commerce, there are three main methods of valuating a business. The earning value approach is generally for companies that are looking to merge with another business, so you would probably use the asset-based or market value approach.
The asset-based approach calculates the amount of assets the business has once you subtract all the liabilities. The market value method compares your business with similar ones that have sold in the area.