A business formed during a marriage is usually marital property. In Illinois, when a couple goes through a divorce, all marital assets, including businesses, need to be divided through equitable distribution. Often in divorce, a business is divided by one spouse “buying out” the other spouse. But before one spouse “buys out” the other spouse, the business needs to be valued. This is called a business valuation (appraisal) and is done through a valuator (appraiser).
The type of business determines how the business is valued. For example, valuing a public company is relatively straightforward. To value a public company simply take the total number of shares of stock multiplied by the price of the shares.Dividing a public company formed during a marriage can be done through transferring stock. (Amazon’s founder, Jeff Bezos, recently divorced and his ex-wife MacKenzie received $38.3 billion of Amazon stock).
Valuing a private or small business, however, is not as straightforward. Private companies don’t report their financials publicly and since there is no stock listed on an exchange it is often difficult to determine the value of the company. Business valuation is not an exact science and there are many different methods to use to value a business.
In divorce, a court could order a valuator to value a business. Also, each spouse could hire his/her own valuator the value the business. Spouses in divorce may have different motives for obtaining a valuation of a business. A spouse who ran the business and who is going to buy the other spouse out of the business may want the business to be valued low.The other spouse will want the business valued high.
Many individuals and firms hold themselves out as valuation or appraisal “experts.” These experts are retained regularly as expert witnesses in litigation on valuation questions. It is easy to be cynical aboutvaluators and valuations.Stories abound of opinions being given in divorce cases to satisfy thespouse paying for it. Consequently, in divorce trials where the value of a business is in dispute it will be necessary for a divorce attorney to attack an opponent’s biased valuation or defend a fair and unbiased one. Consequently, the divorce attorney must understand the methodologies used by the valuator in arriving at his/her value. The Botti Law Firm, P.C. has been serving DuPage and Cook County residents for nearly 50 years. If you would like to speak to one of our experienced attorneys, please email us or call (630) 573-8585 to schedule a free consultation.
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The Botti Law Firm, P.C., conveniently located in Oak Brook and Wheaton, is a full service law firm that offers comprehensive legal representation to individuals, families, businesses and professionals from the Chicago area, including Cook, Kane, DuPage, Lake, Will and Kendall Counties, to the rest of the United States. Our experienced trial attorneys are dedicated to obtaining successful results for our clients, in both state and federal courts.
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