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Valuing a spouse’s business

Whilst both spouses are sometimes genuinely involved in a business it is much more common for one spouse to be primarily involved. For the spouse who is not involved in the running of the business, who may have little knowledge of the business and its value, we can help ensure that you achieve your fair share against the value of a business in a divorce.

With good professional advice, both legal and financial, it is quite possible to find out all that you need to know about your spouse’s business, such that you are in a position to consider key aspects including:

  • Whether you want to and it is realistic for you to continue to share in the income and lifestyle benefits from the business
  • Whether you want to or it is realistic for you to share in the actual ownership of the business
  • Whether it is better for you to remain outside the business
  • Whether it is better and viable for you to seek a capital sum.

Perhaps you do not believe either the value of the assets or the true levels of profitability declared by your spouse and it is not uncommon for a former partner to cynically seek to reduce either or both.

This can lead to major differences. In such a situation it may be necessary to carry out an investigation in order to identify the true income and/or business value.

It is often the case that either small companies or partnerships have not been audited and therefore not been subjected to the same scrutiny as larger businesses that are regularly audited.

It can be important to consider whether there may have been a deliberate attempt to misrepresent the figures presented by a spouse and/or his/her advisers not only in business but personally and investigation of the business and Form E figures can generally include a number of areas such as:

  • Are the financial results unexpected or unreasonable? It is quite common for the pattern of trading to change and for the post-marital breakdown results to take an ‘unexpected downturn’.
  • Has any income been diverted elsewhere, delayed until a later date or, in some cases, simply taken in cash.
  • Have the costs been over-stated so as to depress profits?
  • Has the accounting treatment been changed in order to depress results?
  • What is the real value of the assets employed? Have any assets ranging from freehold to goodwill been intentionally undervalued?
  • Has trade been transferred elsewhere, for example, to another business set up by or with a third party?
  • What are the spouse’s real earnings from the business? Has personal expenditure been paid by the business or excessive benefits taken?
  • Has any money been moved into accounts that people don’t know about?
  • Have assets such as paintings been purchased and then simply disappeared?
  • Has any wealth been hidden overseas – particularly in countries that do not require the names of directors and shareholders as a matter of public record?

It is very important that the spouse not primarily involved in the business takes expert advice in order to ensure that he or she is receiving a fair representation of the business’ value.

If you would like to discuss your particular circumstances with a view to valuing your spouse’s business, please call Malcolm Coomber on 020 8652 2450 or email mec@clarksonhyde.com