A business valuation in a Michigan divorce is important in making sure the division of the marital estate is fair.
After all, if you do not know the value of an asset, any proposed division is just a guess. Michigan divorce lawyers often employ an expert accountant to conduct a business valuation in a Michigan divorce, however, not all business valuations in a Michigan divorce are the same. There are three primary ways to conduct a business valuation in a Michigan divorce.
The first business valuation method is book value. Book value is based on the assets on the books minus depreciation. This business valuation method generally results in the lowest possible value of a business because it fails to take into account intangible value such as goodwill.
Enterprise goodwill is the value associated with the established reputation of a business. In economic terms, how a business stands out in its field and is able to generate more money that its competitors. Personal goodwill is the value associated with the established reputation of a person.
The second business valuation method is market value or what an outside investor would pay for the business. The market value includes the “market” value of enterprise goodwill and generally results in a higher valuation than book value.
The third business valuation method is going concern. A going concern valuation includes a value for the business continuing to operate in the foreseeable future and includes intangible assets such as enterprise and personal goodwill. This valuation method typically results in the highest valuation.
Note . . . be careful of the double dip when conducting a business valuation in a Michigan divorce.
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By: Daniel Findling