Posted by The Family Law Company on 19th December 2011

As part of the process of reaching a divorce settlement, you will be required to make a full and frank disclosure of your financial circumstances.

Since the business can be considered an asset like any other, it is necessary to obtain a fair and meaningful estimate of its value.

It is in your interests to arrive at a fair and meaningful value for the business as soon as you can since costs can rise if it becomes lengthy and complex. You might consider the collaborative approach with face-to-face meeting, thereby reducing the amount of correspondence.

The Valuation Process

Valuing a business is more complicated and subjective than valuing a house. There are many factors to be considered such as projected income, goodwill and the nature of business you are involved in.

Costs of sale, Capital Gains Tax and depreciation costs will be taken into account. It might be that without your skill/expertise your business would be worth very little. It is, therefore, important that a valuation is undertaken at an early stage to ensure that costs do not escalate unnecessarily.

The court usually prefers to appoint a single joint expert, a consultative accountant who will act on behalf of both parties and assess the business with a view to making a valuation.

Sometimes, the valuation may seem too high or low based on the evidence you have submitted. Whilst it is important to remember that the valuation is not the only factor the court takes into consideration, if you think it is inaccurate you may apply to the court for permission to hire separate accountants to do a valuation. This situation is very rare and the courts will only agree if the costs are proportionate to the case.

In all cases, you should take legal, business and accountancy advice. There may be tax and capital gains tax implications in any decisions that you make.

How Will the Valuation Affect the Settlement?

When coming to a settlement, the court will consider the valuation together with all the other family assets. If there are children, the court will evaluate the best possible outcome for their long-term financial stability. Depending on the valuation of your business together with your individual circumstances, this may or may not mean selling the business.

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