In a divorce, almost all marital assets are evaluated, valued and divided between spouses by a judge. For example, a house may be sold and the assets are evenly distributed. Or, this could mean that a house stays with one spouse in exchange for the other spouse keeping an art collection – as long as the value of the division is equal and the spouses agree to those terms.
While this typically doesn’t apply to assets personally owned before marriage, there are some marital assets that people believe they have a right to during a marriage, such as a business. While the value of a business may seem clear-cut, with everything purchased to build the business, many assets aren’t immediately apparent. Valuing a business during the division process can be tricky when some assets are considered tangible and others are intangible.
What are tangible and intangible assets?
Assets are either considered tangible or intangible. Anything you can hold in your hand is likely a tangible asset. Such as, a work computer, business vehicle, tools or furniture are all tangible assets and, therefore, have an easier method to establish value – the same may be said about products that a business provides, land, stocks and bonds.
In contrast, intangible assets can’t simply be held in your hand. The monetary value of an intangible asset may fluctuate and represent potential revenue. One form of on intangible asset could be a patent that’s been paid royalties for its use. Because of this, the value of the patent may fluctuate depending on its use.
Another intangible asset is goodwill – one of the harder assets to value. Goodwill is essentially the revenue created from customer loyalty. Because you can’t control when or how customers use products and services, and customers aren’t business property, you can’t place just any value on their benefit to a company. However, you may be able to determine some value depending on how customers value the products and services or brand names being provided to them.
There’s a lot to understand when handling a small business during a divorce. You may need to know your legal options to ensure you’re taking the right steps and are duly compensated in a divorce.