Monday, April 04, 2011

What does a business valuation in divorce achieve?

If there is a dispute as to the valuation of the family business it will be necessary to instruct a forensic accountant on a joint basis to value the business.

What will they produce?

1.  A fair valuation taking into account the company's profitability, marketability, and the shareholding of the husband/wife.  Not only will they assess the value of the business itself but also whether this should be discounted because of the unique skills of the business owner.  Are there any restrictions on sale?

2.  Is the business simply an income stream? Such as an electrician working alone - sometimes these businesses are especially deceptive and people can have large value contracts with large organisations employing lots of subcontractors - so the one man band is not in fact a man with a van.

3.  What are the tax implications of sale?

4.  Does the business have sufficient capital or funding to buy out the husband/wife's potential share?

5.  What was the value of the business when the couple first got together?

6. The forensic accountant should be able to uncover any false assumptions made in the business accountant's valuation if one has been supplied.

Such a report is especially important given a High Court case reported last week.  The husband's business was valued at £2 million prior to the parties relationship and the court decided to exclude £1 million because of this pre acquired wealth.


Anonymous said...

I'm a psychiatrist. The emotional and financial price for divorce, particularly for men, is so unreasonable I wonder whether marriage should be considered a mental disorder.

Divorce Attorneys Virginia said...

This is a great post. We have been involved in some of this type of work in the past. One in particular where it was a divorce proceeding where the partner was attempting to uncover the full worth of her husband and during the assessment of the company assets, ended up uncovering fraud in the business being carried out by a high level employee. Thanks you on your information.