When a married couple shares a business, divorce can feel like splitting an empire. To each spouse, the business represents years of sweat equity, personal identity, and a hard-fought legacy. That emotional weight makes valuation disputes among the most contentious battlegrounds in high-asset divorces. How do you ensure fairness when both sides claim very different pictures of what the business is worth? Let’s walk through the major fault lines, strategies for navigating them, and how a strong valuation plan can make the difference between a bitter fight and a more predictable, surprisingly peaceful, outcome.
Why valuation fights become central
In owner divorces, it’s common for the parties to agree that the business belongs in the marital estate but to vehemently disagree about its worth. The scale of the disagreement often dwarfs other financial issues like real estate or retirement accounts, because business valuation depends heavily on assumptions, forecasts, and adjusters. Even small percentage changes in discount rates, growth assumptions, or intangible asset treatment can shift outcomes by hundreds of thousands or more.
Moreover, in many divorces the valuation expert is a star witness. Judges often defer to the expert whose methods seem most credible. That means the party that builds stronger assumptions, in writing, with boots-on-the-ground data, can gain an edge. Many courts also grapple with the doctrine of “double-dipping.” This is sometimes called “double counting.” This is where the same income stream is used both to value business assets and to support spousal maintenance. Experts and courts must guard against awarding value as an asset and treating the same stream as income for support. Double dipping is a trap that can overburden the payer spouse.
What fuels valuation disputes
Timing of valuation is a common tension point. Deciding whether value is determined at the date of separation, the date of trial, or some other milestone is essential. A business can rise or fall dramatically between those dates, so the choice of timing has an enormous impact on the outcome. Dividing what counts as goodwill is another thorny topic. Personal goodwill is tied to the owner’s reputation while enterprise goodwill is tied to the business itself. Some courts, like the court in the 1991 Illinois case, Zells v. Talty, exclude personal goodwill from the marital estate. While others reject the notion that personal goodwill should be excluded from the marital estate (McReath v. McReath (2011)). That split can lead to wildly different appraisals.
Couples routinely argue about discounts and premiums. Minority interest discounts or discounts for lack of marketability, because private shares are harder to sell, are routinely argued. These types of decisions must be justified, not assumed, and limited by clear prenup or expert language. Another area of contention is when business records include personal expenses or non-market-rate loans between entities. Experts often “normalize” them. But those adjustments themselves are fertile grounds for disagreement.
Finally, forecast projections of future growth, margins, or profitability are another heavily contested aspect when dividing a business during a divorce. One side may argue a 20% growth rate is reasonable, the other may say 5% is more defensible. Each party would rely on different comparables or industry reports, leading to predictable disagreements.
Techniques to reduce conflict and sharpen valuation credibility
While you can’t eliminate disagreement entirely, you can manage risk and elevate credibility. Here are several strategies:
- Define valuation methods in advance. If the valuation method and timing are articulated in a prenup or shareholder agreement, this reduces room for surprise or aggressive tactics later.
- Choose independent experts. Use neutral appraisers or allow each party to pick one and a neutral third to break ties. This reduces perceived bias.
- Require full disclosure and supporting data. Insisting on clean, audited financials, reasonable forecasts, and supporting documents strengthens any expert’s position.
- Consider mediation or arbitration for valuation sub-disputes. It’s generally far more efficient to have the valuation piece arbitrated by a business-savvy neutral than to litigate expert war in court.
- Use cross-validation. If your divorce ends up in court, then let the opposing expert critique your assumptions in depositions, and let your expert respond. Presenting an expert as transparent rather than combative helps with judicial credibility.
- Simulate multiple valuation scenarios. Running high, mid, and low cases together helps both sides see the sensitivity of assumptions and often nudges parties toward compromise.
A hypothetical example
Imagine a couple co-owns a tech startup, where one spouse is the CEO and the other is not involved in operations. During litigation, the CEO’s expert projects robust growth and includes projected contracts, while the non-operational spouse’s expert uses conservative historical earnings. The low growth assumption leads to a much lower valuation. Without an agreed method for choosing assumptions or weighting models, the court may pick the expert perceived as more credible in the moment. If instead their prenup had established methods and benchmarks for forecasts, and sensitivity ranges built in, the fight would be narrower and more predictable. And ideally, there would be no fight at all.
The emotions that underscore business valuation in a divorce
Valuation isn’t just numbers. What’s often happening beneath is fear, perceived injustice, or hidden leverage. Trust breaks down when one spouse suspects the other is hiding revenue or over-optimistic forecasts. A transparent process with predefined methods, open books, and independent experts fosters trust and a more peaceful resolution. Creating a fair, defensible baseline helps both partners feel heard and protected. In many cases, the valuation process becomes the lens through which the rest of the financial settlement is viewed even when the business is only one piece of a larger estate.
Final thoughts on valuation disputes in owner divorce
In owner divorces, valuation disputes often define the settlement’s shape. The side with better preparation who provides clear data, defensible assumptions, and transparent methodology often wins. Yet the goal shouldn’t just be “winning”; it should be designing a process that keeps the fighting to a minimum and leads to a fair resolution. Valuation disputes will always be complex, but they need not be contentious. With foresight, expert collaboration, and smart procedural guardrails, business owners can approach their “empire” division with dignity instead of dread.
