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The value of proper business valuation in a divorce

Owning your own business can come with many risks and headaches. However, it can also be hugely satisfying to be your own boss and to reap the rewards when your risk-taking pays off.

Because of how invested you may be in your company, financially and emotionally, it can be difficult to accurately assess what that business is actually worth. This can become a major problem if you are getting divorced because you will need to figure out if you are going to keep the business or sell it, and that decision will depend heavily on the valuation.

If you are going to keep the business, you may have to buy out your spouse if he or she also owns part of the business. In order to do this, the value of that ownership must be calculated. Chances are that you and your soon-to-be ex spouse will have different opinions on what it will cost for you to buy him or her out, so assessing the value of the business accurately will be critical.

If you are going to sell the business, you will still need to figure out how much it is worth. Because California is a community property state, you and your ex will divide the profits of the sale between the two of you. Of course, this could all change if you have a prenuptial or postnuptial agreement in place addressing ownership and division of an existing business.

As explained in this Entrepreneur article, the process of valuing a business can be extraordinarily complicated. Oftentimes, it isn't as easy as comparing assets and profits against debts and expenses. There are factors like future earnings to consider, and the personal connection to the business could inflate the value in the eyes of owners.

Considering all that may be at stake if you own a business and are getting divorced in California, it can be critical that you consult an attorney who is familiar with the division of these types of complex assets. With legal guidance, you can secure a fair valuation and settlement.

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