Jul 12, 2016
We understand that your business is priceless in many ways. However, a valuation of ‘priceless’ just won’t cut it in front of a Family Law judge. Step 1 of the four-step process for determining a property settlement is to identify the value of each asset owned by each party to the relationship. So, whether you have a small business, big business, family business or lemonade stand, your Family Law lawyer is going to need to attribute a value to your business.
How do we do this?
There are a number of methods which can be used to value a business. However, before a valuation can even be reached, you are going to need to disclose your most recent business financial statements and tax returns to your lawyer so they can get an idea of the financial position of the business. Once this is complete, your business can be valued by:
- Agreeing on a value: Parties may agree on a nominal value. This may happen where both parties know the business’ finances intimately and can agree on a value. Parties may also agree on a nominal value if the business is not of notable worth.
- Seeking an indicative valuation through an accountant: For small young businesses, a valuation by the business’ accountant may be sufficient to give parties an idea of its value. This option is much cheaper and quicker than finding a professional valuer.
- Seeking a professional valuation through a valuer: This option works best if there is conflict between parties regarding the value of the business or if the value is of a considerable size. This option is the most expensive.
Parties can give instructions for a business to be valued jointly or individually. Seeking a joint valuation is often cheaper and faster since the cost of the valuation will be split between two parties. Moreover, both parties need to have an idea of the value of the business so it is a win/win situation.
Please also note that while an indicative valuation for getting an idea of the property pool is acceptable when moving towards consent orders, the Court will require an expert valuer for full-blown court proceedings.
Consequences
Now, just because your business will need to be valued doesn’t mean it is necessarily up for grabs. Whether your partner will get a share of your business or benefit financially from your business depends on a number of other factors. However, your business will need to be valued according to one of the methods listed above.
If you have a family law matter, concerns about your family business or questions about family law and separation in NSW and want to find out more please do not hesitate to contact us on 02 9688 6023 or email us at jfrank@franklegal.com.au
This article is provided to the reader for general information. It is not legal advice. It was written by Andrea Spencer & Emily Graham and edited by James Frank.
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