If you own a business and are going through a divorce in Wisconsin, understanding how your business will be valued and divided is critical. Here are answers to common questions about business valuation in Wisconsin divorce cases.
Is my business considered marital property in Wisconsin?
In Wisconsin, courts presume all property owned by either spouse is subject to equal division in divorce. If you started your business during the marriage, it is marital property. If you owned it before marriage, it is still divisible, though courts may consider pre-marital ownership.
Any increase in business value during the marriage is generally marital property. If you actively worked to grow the business during the marriage, that growth is marital property even if you owned the business before you married.
What valuation methods do appraisers use?
Wisconsin courts rely on qualified business appraisers to determine the value of a business. Qualified appraisers rely on three primary valuation approaches:
- Income approach: This method values the business based on its ability to generate future income. Appraisers may use capitalization of earnings or discounted cash flow analysis.
- Market approach: This compares your business to similar businesses that have recently sold to estimate fair market value.
- Asset approach: This calculates the value of the business’s assets minus its liabilities. This method is often used for asset-heavy businesses or those not generating significant income.
The appraiser will choose the method or combination of methods that best fits your type of business.
When is the business valued?
Under Wisconsin law, courts generally value marital property as of the date of divorce or trial. The trial date is the standard baseline, though courts have limited discretion to deviate under special circumstances.
If your business value has changed significantly during the divorce process, the valuation date matters. Working with an experienced business appraiser ensures the valuation accurately reflects your business value at the appropriate time.
How is the business divided in the divorce?
Once the business is valued, the court determines how to divide it. Common options include:
- One spouse keeps the business: The spouse who keeps the business may give the other spouse offsetting assets of equal value, such as retirement accounts, real estate or other marital property.
- Buyout: One spouse buys out the other spouse’s share of the business, sometimes through payments over time.
- Sale: In rare cases, the court may order the business sold and the proceeds divided, though this is uncommon when one spouse actively runs the business.
The division method depends on factors like each spouse’s role in the business, financial circumstances and ability to continue operating the business.
Protecting your business interests
Consulting with a family law attorney experienced in high-asset divorces can help you protect your business interests and work toward a fair division of marital property. An attorney can guide you through the valuation process, negotiate division options and help ensure your rights are protected throughout your divorce.
