How Forensic Accounting Helps Value a Business for Divorce
The division of assets in a divorce can be a slow process. The more prolonged this period is, the more unnecessary emotional and financial pressure will be put upon both parties. Forensic accountants are specialists when it comes to investigating particularly complicated financial issues, including valuation of a business in divorce, suspected fraud, commercial dispute resolution and more.
The fair division and distribution of all finances and assets between the two parties in a divorce is often the most complicated and stressful step in the proceedings. This is because of the intricacy and precision involved.
One of the most complex assets to deal with in any divorce is a business. Working out a valuation that both parties are happy with can be difficult. This is where a forensic accountant can be key. A forensic accountant can help value a business during a divorce in many different ways, this includes valuing based on current company assets, factoring in cash flow/gross income/history of debt, the market values of similarly positioned businesses in the same industry, and projected future earnings.
Despite the expertise involved, business valuation for divorce is not a science. It is common for one party to dispute the figure, leading to even more complications and delays to proceedings. Common reasons for a dispute are a perceived exaggerated valuation, belief that the business has been undervalued, information or assets have been hidden leading to a lowered value, etc.
Should a business valuation ever be disputed, forensic accountants will be able to step in and advise you on exactly what steps to make next — this experience is vital in ensuring your best interests remain protected, as well as saving you both time and money.
How to Instruct a Forensic Accountant
You can instruct a forensic accountant on either a single or joint basis, depending on your situation and preference. Should it be needed, they can also act to assist the instructing solicitor or work in an advisory capacity at an early stage in the dispute.
A forensic accountant instructed to assist with a business valuation will typically be responsible for determining:
- The sum of the husband/wife’s interest in the business.
- The sustainable income the husband/wife receives from the business.
- The liquidity they could extract from the business should they wish.
What Information is Required
Valuing a business is not an exact science. Not every company is the same, and for this reason, not every valuation will be the same. Generally, the process of gathering information for a business valuation focuses on two main sectors: financial and commercial information and data.
Financial information that can often be deemed important include full financial statements for the previous five years, projections, budgets, financial forecasts, and more.
The reverse side of the coin refers to important commercial information that can help to pinpoint the value of the business. This includes analysis of turnover, sources of income, information regarding planned expansions, etc.
How to Value a Business for Divorce Purposes
The most important thing when valuing a business — no matter how big or how small — is to try to be as accurate as possible. Estimates help nobody and can often serve to unnecessarily complicate situations down the line should a mistake be noticed. Valuing a business for divorce purposes typically involves detailed assessment of income, net asset valuation, or dividend yield basis.
How Inquesta Assists with Business Valuation
Inquesta have been assisting companies and individuals with their business valuations for decades. We know the ins and outs of the process, as well as the potential stumbling blocks that can arise and lead you astray.
Offering a truly bespoke service, we are perfectly placed to assist you with whatever you could need, whenever and wherever you could need it — no matter the case.
As forensic accounting and licensed insolvency practitioners we can offer a truly holistic service that covers all bases.
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“Rob Miller is my first choice for forensic accountancy on criminal cases. He has an impressive eye for detail and adopts a ‘user-friendly’ approach to interaction with our clients and other professionals which ensures the smooth running of any task we instruct him to undertake.”
Our Specialist Team
The team at Inquesta work together towards one shared uniform goal: achieving the best possible result for all of our clients. We have seen everything, and know exactly what to say and do next.
Rob Miller
Director of Forensic Accounting
A co-founder of Inquesta, Rob Miller is a chartered accountant, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), and a Practising Member of The Academy of Experts.
With decades of experience in providing specialist forensic accounting services, Rob has been instructed to assist with numerous cases — such as financial investigations, criminal defence and confiscation proceedings, commercial and contractual disputes, valuation matters, and much more besides. He has acted on behalf of claimants, defendants, and as a single joint expert.
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Valuing a business can be one of the most complicated aspects in any divorce proceedings. The complex nature of the process is likely to force the mediation to continue far longer than either party would like, causing additional pressure and stress for all involved.
If you’re working to find a resolution that both parties are happy with in divorce proceedings and are finding that the valuation of a business asset is acting as a notable stumbling block, Inquesta has prepared a valuation guide specifically covering business valuation for divorce lawyers.
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