How to value a business in divorce proceedings?

Business interests are often among the most complex and disputed assets on divorce. Whether one party is a sole trader, a partner in a professional practice, or a shareholder in a private company, determining the value of their interest can be crucial to achieving a fair financial settlement on divorce. 

This blog outlines why, when, and how businesses are valued in divorce proceedings in England and Wales, including the methods used and the role of expert evidence, and the key considerations for the court in determining a settlement. 

Why does business valuation matter in divorce?

In many divorces involving business owners, their business interest may represent the most valuable asset. Disputes may arise over the true value of the business, whether it should be treated as a matrimonial asset, and whether it can realistically be sold or divided.  

A business valuation can be key to resolving these disputes and to help determine:  

• The overall financial settlement 

• The calculation of lump sum or maintenance payments 

• Whether assets are divided or offset 

• Whether one party can retain the business  

• Future earning capacity (where the business provides on ongoing source of income)

When are business assets valued in divorce?

Business valuations are usually sought once both parties have exchanged financial disclosure, typically through the standard disclosure form known as the Form E (sections 2.11, 2.12, and, where relevant, 2.14), which requires each party to disclose any interest in a business, including shareholdings, directorships, or partnership arrangements. 

A business valuation will be sought when: 

• There is a dispute over its true value 

• One party wishes to retain the business 

• The business generates significant income 

• There are concerns about hidden assets or manipulation of figures 

How are businesses valued in divorce?

Methods of valuing a business in divorce  

There is no one-size-fits-all method for valuing a business. The most suitable approach depends on the type of business, its asset base, profitability, and whether it relies heavily on the involvement of one spouse. 

The method of valuation used will depend on the nature of the business and may be influenced by: 

• The industry or market sector 

• The level of retained earnings 

• Whether the business is owner-dependent 

• Whether the interest is a majority or minority shareholding 

Where a party holds a minority interest, minority shareholding discounts are often applied to reflect lack of control and marketability. 

Occasionally, the court may postpone valuation where a business is undergoing substantial change, such as restructuring or a pending sale. 

The role of expert evidence

Single joint experts: Courts typically prefer the appointment of a Single Joint Expert (SJE) to avoid conflicting reports and unnecessary expense. An SJE must act independently and comply with the Family Procedure Rules (Part 25) and relevant practice directions. 

An expert report may cover: 

• The valuation method and justification 

• The value of tangible and intangible assets 

• Shareholding structure and voting rights 

• Minority share discounts and liquidity issues 

• Commentary on potential sale or income extraction 

Where the SJE’s findings are disputed, a party may seek permission to instruct their own expert – particularly in very high value or high conflict cases. This is allowed only where there are strong grounds – such as material omissions or disagreements over methodology.

What are the factors that affect business valuation?

A range of legal and commercial factors can influence the valuation. These are considered by the expert(s), and by the court when assessing how business interests should be treated within the settlement. 

Key factors include: 

• Level of involvement – A business reliant on one spouse’s personal input may be valued lower due to key person risk 

• Liquidity – If the shares cannot easily be sold or accessed, this reduces their realisable value 

• Market conditions – Broader economic conditions may affect the business outlook 

• Debt and liabilities – Outstanding borrowings reduce the net value 

• Growth potential – Future profitability or pending contracts may increase value 

• Tax implications – Capital Gains Tax or other liabilities can materially reduce what the owning party will receive 

• Timing and ownership history – If the business pre-dated the marriage, non-matrimonial arguments may arise 

What are the tax implications?

Once the business’s value is established, the parties, and the court, must consider how to reflect that value within the wider settlement. 

Selling or transferring a business interest can trigger tax liabilities, including: 

• Capital Gains Tax 

• Income Tax (if drawing out funds) 

• Loss of Business Asset Disposal Relief (formerly Entrepreneur’s Relief) 

Expert reports often include tax-adjusted valuations, and it is common to consult with accountants on these issues. 

The key considerations for the court

The Matrimonial Causes Act 1973

Under section 25 of the Matrimonial Causes Act 1973, the court must consider all the circumstances of the case, giving first consideration to the welfare of any children. Relevant factors include: 

• The parties’ financial resources and earning capacity 

• The standard of living during the marriage 

• The duration of the marriage 

• Contributions made by each party, including non-financial contributions 

• The value of any property, including business interests 

The court does not simply divide business assets equally. Instead, it considers factors such as liquidity, control, income potential, each party’s role within the business, and whether the business is matrimonial or non-matrimonial. 

Matrimonial vs non-matrimonial

If the business was established or significantly developed during the marriage, the court is more likely to class it as matrimonial. However, even a pre-marital business may be considered matrimonial if it has grown substantially or has been intermingled with family finances. 

Where the court accepts that all or part of the business value is non-matrimonial, it may exclude or discount the asset value when dividing assets – particularly if the needs of both parties can still be met. 

Fairness and judicial discretion

The court’s approach is based on achieving fairness. This means the court may: 

• Allow one party to retain the business intact 

• Adjust the share of other assets to compensate 

• Use deferred payments or staged settlements to avoid a forced sale 

Each case is determined on its own facts, and the court retains wide discretion. 

Settlement structures

Courts are generally reluctant to order the sale of a trading business, especially where it provides income or employment. Instead, settlements may involve: 

• Lump sum payments funded by retained earnings or external financing 

• Transfer of shares with or without voting rights 

• Offsetting against other assets such as pensions or property 

The goal is to achieve fairness without disrupting business continuity. 

When may the court defer distribution?

In some cases, immediate division of business assets is not practical or appropriate. The court has several tools to address this, including: 

• Wells Orders – Allowing one party to retain ownership, but requiring them to share future sale proceeds or income 

• Deferred lump sums – Providing time to raise funds without damaging the business 

• Trigger-based settlements – Delaying asset division until a future event (such as a child turning 18 or a business exit) 

These approaches are particularly useful where the business is illiquid, or its true value cannot yet be realised. 

How Anthony Gold can help in divorce matters where business needs valuation?

Valuing and dealing with a business in divorce can be complex. Our experienced family lawyers regularly advise business owners, entrepreneurs, and spouses in this area of law. 

Get in touch with our Family Law team today for specialist legal advice tailored to your individual circumstances.

If you are looking for more information, please also read our guide on financial settlement in divorce or dissolution, which also contain definitions, processes, tips, and FAQs.