Valuing a Business in a Divorce
One of the most contentious issues involved in a divorce proceeding is the equitable division of a business. Whilst it may be a simple solution to sell the business off, and then to equally divide the business, it is in most cases not a viable solution. The process of finding a buyer takes time and does not happen immediately, and also it may not be in the best interests for the business to be sold off.
The division of a business can be tricky because of various reasons such as under reporting of revenue or over declaration of expense to falsify financials, resulting in inaccurate valuation.
Hence in the valuation of a business, there are certain features more distinct than any other type of business valuations. For one, it is very important to know at what point in time (date) the business valuation is to be conducted for. There are other considerations such as “double-dipping” though not common in the valuation cases for divorce proceedings done in Singapore and Malaysia.
Determining the value of a business that is caught up in a divorce proceeding can be a straightforward or can be a highly complex case; it ultimately boils down to the level of genuineness shown in the business financials and the willingness of relevant parties to provide the necessary information.
In addition to this, valuation methodologies and approaches vary from industry to industry, there is no such thing as ‘one formula’ to solve them all. Every valuation case is unique, just as every business is unique.
Generally speaking it is worth to get a business valuation done if the business entangled in a divorce proceeding has an annual turnover of over $75,000.
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