Business owners going through divorce most likely will need to obtain a valuation of their business. Usually, the most time-consuming part of the valuation process is gathering all the necessary documents. Below is a list of documents that will likely be required to perform a valuation:
Business Tax Returns
You will need to gather your business’s tax returns, likely from the last three years. The tax returns need to be complete. For example, if you are conducting a valuation on October 12, 2023, you would need to submit the federal tax returns from 2022, 2021, and 2020.
Business Income Statements
Another term for a business income statement is a profit and loss statement (P&L). The tax returns and P&Ls should line up with each other — they do not have to match exactly, but they should be close. You will likely need to provide the P&Ls from the past three years. For example, if you are conducting a valuation on October 12, 2023, you would need to submit P&Ls from 2022, 2021, and 2020.
A Year-to-Date Income Statement with a Comparison to Last Year
This will allow the valuator to see the company’s most recent income statement in comparison to an income statement from the same period a year ago. The valuator will then use this information to predict or note fluctuations and trends in the company’s income.
Company Balance Sheets
Balance sheets will show how much the business has in accounts receivable and in inventory. Again, you will likely need to provide year-end company balance sheets from the past three years, just as above.
Current Monthly Balance Sheets
When valuators look at a current balance sheet (likely as of the most recent month’s end), they have a more accurate picture of accounts receivable and inventory compared to a year-end balance sheet, which may be outdated by the time of the valuation. If the valuation takes place on October 12, 2023, for example, then you will likely have to provide balance sheets from January 1, 2023 – September 30, 2023.
Estimate of Your Company’s Current Inventory at Cost
This document will contain information such as a list of company inventory and what the business paid the vendors for it. The valuator will add the amount of your inventory to the total estimated worth of your business.
A valuator may also request information such as:
- The company’s business plans.
- The company’s equipment lists and leases.
- The details of some of the company’s major contracts.
- The company’s depreciation schedules.
- The details of the company’s pending litigation.
- The company’s payroll report.
- A list of the company’s intellectual property.
- The company’s real estate or property lease information.
- The company’s forecasts and projections.
After providing the valuator with all the information requested, they will usually take between 2-6 weeks to complete the business valuation and provide a report. However, changes in company performance (whether good or bad) and market fluctuations can cause the valuation to become outdated — even if it was completed recently.