What You Need to Know About Valuating the Family Business for Your PA Divorce.

Pennsylvania is an equitable distribution state. This means that when a couple divorces, all marital property must be divided between the spouses. If you or your spouse owns a business, the business may be considered marital property.

Before you and your spouse can determine how the business will be treated in the divorce, you will need to have the company valuated by a professional business valuator. The value of the business will be assessed from the date of marriage to the date of separation. It is based on a number of factors, including the cash value of the business, the business’s assets and debts, tangible and intangible property, and expected profits and income.

You and your spouse may choose to do a single valuation or you may choose to do separate valuations. Doing one valuation will save money. However, you and your spouse will have to agree on a business valuator. You can ask your attorney to refer you to an experienced and reliable business valuator.  If you feel that the valuation is too high or too low, you may want to get a second opinion.

Here are some warning signs that the business valuation is not valid.

  • Your spouse stalls or refuses to hand over financial documents.
  • The business began losing money around the same time that your divorce became inevitable.
  • The business is losing money, but your spouse’s lifestyle does not reflect a loss of income.
  • The business is paying your spouse’s personal expenses. 

If the business valuation is too low, you may want to consider hiring a forensic accountant. The accountant can look at business’s tax forms and financial records and determine if your spouse is hiding income. Hiding income is illegal under Pennsylvania divorce laws.