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Business valuation: What is it and how is it determined?

Ending a marriage in court is never any easy process, as many Illinois residents who have gone through it may attest. Extenuating circumstances can complicate matters even further, such as disagreements regarding care and upbringing of children or marital property, etc. When a divorcing couple owns a business together, a business valuation is typically needed before a judge can determine its asset value and how it should be divided, if at all.

How can anyone determine the exact worth of a business? That's obviously nearly impossible, as "worth" is a subjective term. A business might mean much more to one person than another. Thus, the system is set up to scrutinize fair valuation of a business, which generally entails several different approaches.

Assets, market value and income (existing and potential future) each bear significant impact on a fair business assessment. Along with assets, comes liabilities. The net worth of a business is a crucial component of its overall valuation.

Researching what other similar businesses in the area are selling for is a basic approach to determining a business's current market value. Before an Illinois judge can determine how business assets are to be divided between spouses in divorce, the basic fundamental approaches toward a complete business valuation must typically be applied. A concerned spouse will want to make sure he or she seeks personal guidance in retaining a valuation of a business that can be compared to any valuation a soon-to-be former spouse has secured. A business and commercial law attorney can be of tremendous assistance in such situations.

Source: valuadder.com, "Business Valuation: Three Approaches to Measuring Business Worth -ValuAdder", Accessed on Feb. 21, 2017

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