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Franklin Divorce Attorney > Blog > Divorce > How To Value A Business In A Tennessee Divorce

How To Value A Business In A Tennessee Divorce

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One of the most significant aspects of a Tennessee divorce is the division of assets between the couple. If one or both spouses own a business, it is often the most valuable asset for the family. But how do you determine the value of a company in a divorce? At Fort, Holloway, & Rogers our dedicated and experienced Williamson County divorce attorneys are here to help. Call the office or contact us today to schedule an evaluation of your divorce case now.

Separate and Marital Property

The first step that must be taken in any case involving business interests is to determine whether those interests are separate or marital. If one spouse started a business or acquired business interests prior to the marriage and kept those assets completely apart from marital assets during the course of the marriage, the business is likely separate property. However, if the spouse commingled business and marital assets or started the business during the marriage then it would be considered marital property in a divorce.

Valuation Methods

If a business has been identified as marital property, the next step is to figure out how best to value those interests in a divorce. There are three common methods for valuing business interests in Tennessee:

Asset Approach

The asset approach is the most basic and straightforward method. The liabilities are subtracted from the assets to provide the value of the company. This includes tangible and intangible assets and liabilities. However, the asset approach does not take unrecorded assets and liabilities into account, which is why this method works best for small, uncomplicated companies.

Market Approach

The second method for valuing a business is the market approach. This method is similar to valuing a residential property, where comparable sales of businesses are used to determine the value of the company. However, this method only works if there are other businesses in similar industries, in the same geographic area, and of similar size to compare the business to.

Income Approach 

The income method is the third option for determining the value of a business in a Tennessee divorce. This method uses formulas that take into account the historical cash flow as well as future expected cash flows in order to calculate the total value of the business. This method also takes into consideration the rate of return, various risks to the business, and other future benefits that may impact the company’s current value. While the income method is the most complicated way to determine the value of a business, it is also the most comprehensive and most common method used in divorce cases today.

Talk to Our Office Now

Valuing a business can be a complex but critical part of your divorce case, so if you have more questions about the property division in your divorce case, the knowledgeable Franklin divorce attorneys at Fort, Holloway, & Rogers are here to help. To schedule a consultation of your case, call the office or contact us now.

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