Many high net worth divorces in New Jersey involve the distribution of business assets. Whether a spouse is an entrepreneur who launched a successful venture or an individual who took over and grew a family business, the disposition of ownership shares can be a complex and highly contested process. In some cases, it is difficult even to get parties to agree on an approximate valuation of a husband or wife’s ownership stake.

There are several different ways to assess how much a business is worth. Common valuation methods include the following:

• Income-based analysis — Existing information regarding a company’s income and expenses can be used to help forecast future profits. This method can be particularly effective for service-related and professional businesses that have been in operation for several years. This type of analysis also considers anticipated growth and market risks. 

• Review of comparable companies — The market approach determines value by comparing the business to similar companies that have recently sold. This method is common when market data is accessible and when the business operates in an industry where there have been numerous transactions involving similar companies.

• Assets minus liabilities — Some organizations derive most of their value from the ownership, management and sale of tangible assets, such as real estate holdings. In these cases, totaling up the value of what is owned and subtracting mortgages and other liabilities might provide an accurate representation of a company’s value. 

• Intellectual property potential — Technology startups and companies dedicated to scientific research can possess a patent or another type of potentially lucrative intellectual property that is not reflected in an existing balance sheet.

The appropriate valuation method depends on several factors, including the business type, financial performance, industry and ownership structure. In some cases, a hybrid approach may be used to ensure a more accurate picture. Importantly, courts often rely on expert testimony from forensic accountants or valuation professionals.

If you’re going through a high net worth divorce that involves a business ownership interest, it’s crucial to work with experienced family law and financial professionals. At Hollander, Strelzik, Pasculli, Vandenberg, Hontz & Associates, LLC , we have achieved successful results for numerous New Jersey clients in marriage dissolution cases where substantial assets were at stake. Our offices are in Newton and Succasunna. For a consultation, please call 973-737-1023 or contact us online.