It stands to reason that, in the majority of cases, getting divorced or facing any form of relationship breakdown is likely to have an impact on a family business. Whilst it may be possible to keep things as they are, this may not be a practical option for others, either for personal or financial reasons.
Full and frank disclosure
In a divorce both parties have a duty to make full and frank financial disclosure about their finances. This includes their home, savings, investments, pensions and income. This obligation to disclose financial information also applies to business interests.
What financial information is required will depend on several factors, the type of business, whether it is a company, its size, turnover and the involvement of third parties. It is likely that you will need to provide as a minimum, copies of the business accounts for the last two years.
Why is my business relevant?
Businesses can be relevant for a number of reasons including being the income source for one or both of the parties; the business may own realisable assets which could be a source of capital and it may be possible to raise money within the business to meet family needs. The business itself may also have a value.
Many businesses are small concerns whose importance is primarily the income stream they produce. Whilst a business may be relevant it does not follow either that the business or its income or assets will be directly affected in a divorce. There are many ways in which account can be taken of the business so that it continues to operate after a financial settlement.
It is not always necessary to have a valuation of a business but if it is needed, a valuation should be carried out by a suitably qualified expert. This is often an expert both parties agree and jointly instruct sharing the fees of the expert. The valuation of the business is a complex process and the valuer will consider projected income, the nature of the business, turnover, depreciation, assets, liabilities and goodwill.