Wednesday, 3 February 2016

Valuing a business for family law property division

The valuation of a business is a complex objective. When it is to be done for consideration of how to divide property in family law matters it is even complex.

This is because the concept of 'fair market value' - the price that might be negotiated in an open market between an informed and willing buyer and an informed and not anxious seller, both acting at arms length - is confronted by the strategic interests that are characteristic of family law disputes.

In family law, allegations can be made that the value of the business has changed since separation. For example, one party has eroded the working capital, or that assets have now been hidden, or even that existing trade has been deliberately impaired. The party working in the business may allege that public statements by the other party following separation are harming the operation or profits of the business.

These issues are all relevant in the preparation of a business valuation.

But even in the absence of such allegations the value of a business will simply be influenced by the "value to the owner"; so that the history of a business having been passed down through a family, or established with another family member, the continued employment of a party or even that the business operates out of the family home are also considered in valuing a business for family law purposes.

1 comment:

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