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Knowing The Difference Between Market Price And Fair Market Value In A Divorce

The greater the financial worth of a business, the greater the impact it will have on an upcoming Ohio divorce. Unless the business owner planned ahead and has an enforceable prenuptial agreement, the chances are good that they must take assertive steps to protect the company that they founded, purchased or inherited. The failure to properly handle the equitable division of a business in a divorce could threaten continuity of operations.

A business acquired and/or operated during the marriage is part of the marital estate and may actually be the most valuable asset that the spouses have to address during property division negotiations. Someone seeking to protect their interest in a business or professional practice has to very carefully evaluate what the company is currently worth. Knowing the value of the company, as opposed to its price, can be very important for those preparing for an Ohio divorce.

The difference between market price and fair market value

At first glance, price and value may seem like interchangeable terms. They are both financial representations of the company’s worth. However, they are drastically different figures in many cases. A price reflects a value as a function of a larger transaction – often a transaction with terms requiring the selling party to remain with the company or enter into a non-compete.  Additionally, the sale price may include a premium for a strategic acquisition.

The fair market value of a company, on the other hand, is what it is actually worth in its current state. In many cases, the value of a business is substantially different than the price someone might assess when selling the organization. There are actually numerous different ways to accurately assess the value of a business. Looking at the likelihood of continued cash flow and profitability, capital expenditures and the like can give a more holistic and robust valuation.

Oftentimes, those with an ownership interest in a company or professional practice need support with the evaluation process and may also need help strategizing for the protection of the business during their divorces. Those who can establish the value of their business holdings can then begin negotiating a reasonable way to address their ownership interest during their property division proceedings.


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