Navigating Divorce: Why Business Valuations Require Multiple Experts

The divorce process can be particularly challenging for business owners, as dividing assets that include a business requires careful consideration and expert input. One common question business owners face is whether they need to hire two valuation experts and how this affects the costs. This blog explains why two experts are often necessary in divorce cases and how the process works.

The Need for Two Experts in Business Divorce Cases

When a business is part of a divorce settlement, hiring two separate valuation experts is often required. Each party typically hires an expert to assess the value of the business, and these experts may present vastly different conclusions. The discrepancy in valuations can occur for various reasons, such as different methodologies, data interpretations, or assessments of the company’s financial health.

If the values presented by both experts are significantly different, it can lead to complications in the court’s decision-making process. The judge may choose to average the two values or find a middle ground. For example, if one expert values the business at $2 million and the other places its worth at $500,000, the court might decide to settle on an amount that reflects both values, potentially halving the business’s worth.

The Role of Valuation Experts in Divorce Settlements

Valuation experts play a critical role in the divorce process. They assess the business’s current value, review financial records, and determine its fair market value. This process ensures that both parties have an accurate understanding of the business’s worth, which is essential for equitable distribution of assets.

In cases where one spouse is not the primary income earner, such as when one partner runs the business, both experts' fees are usually covered by marital assets. The attorney representing the higher-earning spouse may even request that the other party pay for the expert's fees, though this depends on the specifics of the case.

Cost-Efficient Alternatives: Hiring One Expert

While hiring two experts is common, it is sometimes possible to streamline the process by hiring a single expert to serve both parties. If both parties can agree on an impartial expert, this can save time, reduce expenses, and ensure that the process is fair. The expert must be neutral and capable of working with both parties to present a joint valuation. However, both parties must agree on this expert, which can be challenging when each side has a different opinion on who should be hired.

Conclusion

For business owners going through a divorce, hiring the right experts is essential to ensuring that the business is valued accurately and fairly. While hiring two experts can seem like an additional expense, it can ultimately lead to a more just outcome. It’s important for both parties to work closely with their attorneys to understand the valuation process and make informed decisions.

For assistance with your divorce case, especially when a business is involved, contact a trusted expert who specializes in divorce-related valuations. Visit Valuation Mediation for more information.