If you are a sole proprietor and you are in the midst of a divorce, you may need to consider how your business will be addressed in that divorce settlement. Depending on the state you live in, your soon-to-be-ex may be entitled to a percentage of your business. If you want to buy out that interest in a lump sum, you need to know precisely how your business is valued. Here is what you need to know about business valuation, to bring to a business accounting service.
Work With an Accountant
Trying to assign a value to your business can be complex when you lack the expertise to do it right. If you need a business valuation for any reason, it is in your best interest to work with your company's accountant to complete the assessment and establish a valuation.
Evaluate Your Business Performance
Talk with your accountant about your business performance. You will want to know more than just what your company's revenue looks like, though. Ask about your sources of income as well. For example, if a large portion of your company's revenue comes from a single customer, that can actually reduce your company's value because losing that one customer could have a drastic effect on the company.
It is important that you look at the revenue trends, too. If your company's revenue is growing year over year for the last few years, that can have a positive effect on your company's valuation, while declining revenue can reflect poorly.
Think About All of Your Assets
In addition to your revenue streams, totals, and trends, you also need to consider the company's assets. Most people immediately think of capital investments, property, inventory, and equipment when they think of assets. These are certainly an important part of your business valuation.
However, those are not the only assets that you need to think about. You will also have to assess the intangible assets that your business owns. This includes intellectual property, employees who are vital to your company's operation, trade secrets, and more. Your accountant will be able to help you assign an adequate value to those things.
These are some of the key considerations when you need a business valuation. An accurate and comprehensive valuation will help ensure that your divorce settlement reflects an accurate value of your business and you are paying a fair amount in the settlement payment. Reach out to your accountant today for more information and to schedule the valuation that you need.