Will I Need A Business Valuation In My Missouri Divorce Case?

In a Missouri divorce, any business that was founded or built up during your marriage will typically be considered a marital asset and be divided. However, this division will be equitable, not necessarily equal.

The first step toward deciding what would be equitable is determining what the business is worth. That requires a business valuation. It is important to note that once the business’s value has been established, that value will be taken into consideration in several areas during divorce.

Missouri Law’s Goal Is The ‘Equitable’ Distribution Of Assets

In Missouri, marital assets (those acquired or built up during the marriage) must be divided equitably between the spouses. The courts are required to divide up the parties' marital assets equitably, not evenly. Any business’s value must be determined to ensure an equitable division. The valuation helps the court understand the worth of the business and how it should be treated in the asset distribution process.

A Business Valuation Allows The Company To Be Divided

The business valuation will clarify the business’s worth at the time of divorce. If the business is considered marital property (e.g., started or built up during the marriage), the party who was not operating the business is still entitled to a share of the business’s value, even if they did not contribute to its operation. The valuation identifies the monetary value of that interest.

A Business Valuation Can Affect Spousal Support/Maintenance

A business valuation can influence spousal support/maintenance (“alimony”) calculations. A high business valuation may indicate the ability of the paying spouse to afford higher spousal support, especially if the business is generating significant income. Conversely, if the business is undervalued or facing challenges, it may affect the business-owning spouse’s ability to pay, or the amount of maintenance awarded.

The Business Valuation’s Role In Settlement Negotiations

A business valuation provides both parties with a clearer understanding of the value of their assets, which can be pivotal in settlement negotiations. It can either facilitate an agreement or create challenges, if one party contests the valuation.

The Tax Implications Of A Business Valuation

Valuing a business during a divorce may have tax consequences. The way the business is divided (e.g., through a buyout or asset transfer) can trigger tax liabilities, such as capital gains taxes or income taxes. Both spouses will need to consider the tax impact when negotiating the division of the business.

The Valuation’s Effect On Your Ongoing Role In The Business

If one spouse intends to remain involved in the business after the divorce, the valuation can inform the terms of continued participation. If only one spouse remains in the business, the non-operating spouse will need to "buy out" the other spouse’s interest. The valuation helps determine the fair price for this buyout.

Are Multiple Expert Witnesses Necessary?

Business valuations are often contentious because they involve complex assessments of financials, market conditions and future earnings potential. Disagreements are especially common when the business is privately held and lacks easily ascertainable market value.

Expert witnesses, such as financial professionals or business valuators, are typically employed. Typically, both parties hire their own business evaluators, but it isn't atypical for the parties to agree on a mutual evaluator to conduct the valuation. It is important that the parties understand the pros and cons of agreeing to a mutual evaluator as opposed to hiring their own separate evaluator.

The Importance Of The Valuation Date

The timing of the valuation is crucial. This is particularly important in cases where the business may have fluctuated significantly in value during the divorce proceedings.

The Valuation’s Impact On Business Operations

The valuation process can also reveal how the business is performing financially, which may affect the future prospects of the business. If one spouse is forced to liquidate part of the business or its assets to settle the divorce, this could affect the business’s long-term viability.

Conclusion

Anyone with a small business or professional practice could need a business valuation in their divorce. The business valuation provides the financial foundation for dividing the asset fairly and making key decisions about everything from maintenance and child support to future ownership.

Accurate and comprehensive valuations are critical in helping the court and the parties reach a fair resolution. Businesses in divorce cases require careful attention to detail, and expert valuations will become the cornerstone of negotiations or litigation.