Insights · Divorce

Divorcing a business owner: how to check what the business is worth

If your spouse owns a business, you are likely to be at an information disadvantage. They know how the business really performs. You see what they choose to disclose. This guide explains what to ask for, what to look out for and when an independent valuation is worth having.

The short answer

In England and Wales a business built up during the marriage is usually a matrimonial asset, even if you never worked in it. Courts rarely force a sale. The owner usually keeps the business and you receive a larger share of other assets to balance it. So the value placed on the business directly affects your settlement.

What to ask for in disclosure

• Statutory accounts for the last three years.
• Current year management accounts.
• Corporation tax returns.
• The director's loan account and bank statements for the business.
• Details of the owner's salary, dividends, pension contributions and benefits.
• The share register and any shareholder agreement.

Your solicitor can request these through Form E and follow-up questionnaires.

Red flags in the figures

• Profits dropping around separation. Delayed invoices, deferred contracts or a sudden rise in costs can depress the numbers temporarily.
• Personal spending through the business. Cars, family phones and travel reduce reported profit. A valuer adds these back.
• Salary below market rate. If the owner pays themselves little and leaves cash in the company, the profit picture needs adjusting.
• Cash held in the company. Surplus cash is usually valued on top of the trading business.
• A valuation without workings. A single figure from the owner's own accountant is not an independent view.

How a fair value is worked out

Most UK SMEs are valued on normalised earnings multiplied by a market multiple. Normalising means removing one-off items and personal costs, and replacing the owner's pay with a market rate salary. The multiple reflects the sector, size, risk and how dependent the business is on the owner. Property and surplus cash are usually considered separately. See our guide to how businesses are valued in divorce for the methods courts accept.

Watch for double counting

If maintenance is paid from the owner's income, and that same income also supports the business value, the court may consider whether the two overlap. This is a point for your solicitor, but a clear valuation report makes the earnings assumptions visible.

When an independent valuation helps

An independent report is worth having when the owner's figure seems low, when no figure has been offered, or before agreeing to a single joint expert so you understand the range. Our valuations for the spouse of a business owner start from £795, with the report in 3 working days from receipt of the information we need.

This guide explains valuation, not legal advice. Speak to a family solicitor about your settlement.