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Why a Comprehensive Business Valuation is Essential in a Divorce

by | Jan 26, 2023 | Divorce

Small business is at the heart of our economy. The Small Business Administration (SBA)  reports that there are more than 525,000 small companies operating in Minnesota—employing nearly half of the state’s total workforce. For business owners, going through a divorce can be especially challenging. It is imperative that they know how to protect their rights and their company.

A comprehensive business valuation is an absolute must for any business owner going through a divorce. You cannot effectively handle a business in a divorce unless you know exactly how much it is worth. In this article, our Mankato divorce lawyers explain the most important things that you should understand about the role of a business valuation in a divorce.

Background: Minnesota is an Equitable Distribution State

Under Minnesota law (Sec. 518.58 MN Statutes), property acquired during a marriage is considered marital property and is subject to division upon divorce. This includes any assets or liabilities acquired during the marriage, regardless of how they are titled. Minnesota is an equitable distribution state, which means that the court will divide the marital property in a way that is fair and just, but not necessarily equal.

A Business May Be Marital Property in Minnesota

A business that was started or acquired during the marriage may be considered marital property and subject to division upon divorce. A company that gains substantial value may also be deemed a marital asset in Minnesota. For this reason, it is crucial that you know exactly what your company is worth.

You Cannot Divide a Business Unless You Know How Much it is Worth (Valuation is Key)

In order to determine how to divide a business in a divorce, it is essential to know the value of the business. This is where a comprehensive business valuation comes into play. A business valuation involves determining the value of the business by looking at its financial performance, assets, liabilities, and potential for future growth. Without a business valuation, it would be difficult to determine how much the business is worth and how it should be divided in a divorce.

How to Conduct a Business Valuation in Minnesota

A business valuation is generally conducted by a financial professional. Most often, it will involve   the analysis of the financial statements of the business—including income statements, balance sheets, and cash flow statements. Other factors matter as well, such as the assets and liabilities of the business, as well as any potential for future growth. Additionally, they may consider the industry in which the business operates, as well as any economic or market conditions that may impact the value of the business.

We Provide Divorce Representation to Business Owners in Southern Minnesota

At Kohlmeyer Hagen, Law Office Chtd., our Minnesota family law attorneys have the professional skills and legal expertise to help business owners navigate divorce. If you have any questions about business valuation, we are here as a legal resource. Contact us today at 507-405-2442 for a fully confidential case review. With law offices in Mankato and Rochester, we provide family & divorce representation to business owners throughout Southern Minnesota.