Discover expert assistance in navigating Business Valuator Help with Divorce decisions with Business Valuator help. Gain insightful guidance for making fair and informed financial choices during challenging times. Divorce can be a very contentious process; often, the biggest issue is how to divide up the assets. This is where a Chartered Business Valuator (“CBV”) can be extremely helpful. Chartered Business Valuators are professionals who help couples understand the financial implications of a divorce. In a divorce situation, a Chartered Business Valuator can help determine the value of any businesses that either party owns.
In this article, we will discuss how Chartered Business Valuators can help divorced couples and how they can help ensure that both parties receive their fair share of the assets.
Business Valuator Help with Divorce Valuing the Business
Chartered Business Valuators can help resolve many disputes related to business interests in divorce, including the value of a business, how to divide the business interest, and whether one spouse should buy out the other’s shares.
A Chartered Business Valuator can also help determine whether or not a business has commercial goodwill, or intangible value, over and above its reported net assets. In the absence of commercial goodwill, it may not be worth spending a disproportionate amount of time and money fighting over it. A CBV can help provide clarity in these types of situations.
A Chartered Business Valuator can provide a more objective perspective on these issues than either party to the divorce, which can help reach a resolution. In addition, a CBV may be able to identify options that neither party had considered.
A CBV will also consider various factors, including the size of the business, its profitability, and its future growth potential. The CBV will also consider each spouse’s contributions to the business. Once the CBV determines the business’s fair market value, the spouses can then negotiate on the division process
Calculating Guideline Income for Spousal and Child Support
Divorcing couples often consider spousal and child support payments. For business owners, income determination for support purposes is complex, and a Chartered Business Valuator will help determine the actual guideline income generated by the business to use as the basis for calculating support payments. The guideline income calculation follows the Federal Child Support Guidelines (FCSG).
Calculation of Annual Income
According to Section 16 of the FCSG, the determination starts with the total income of the Payor’s personal income tax return. It also includes employment and dividend income, interest, and other income sources. The following adjustments lead to calculating the total income:
- Deduction of child care and spousal support payments
- Deduction of gross taxable dividends
- Addition of half of the taxable capital gains
- Addition of capital cost allowance on property
- Deduction of carrying charges
In-Depth Analysis
Business owners who own their companies can hide their income to avoid paying income tax. Therefore, the FCSG has set a few rules to declare the actual income for support.
If someone has a company, they can split their income with someone else. They can also use the business income to pay personal expenses and receive a tax write-off. Under-reporting the revenue is another possibility, and so is the income diversion to another entity.
In a few cases, a chartered business valuator must perform a forensic accounting review to discover unreported expenses and revenues.
After completing the normalizations to corporate income, a decision is made about the corporate income attributed to spousal support. According to the FCSG, some, none, or all of the company income can be assigned to paying for support purposes.
Clients often ask for a reduction in professional fees when dealing with a business evaluator.
The biggest contributor to fee spills is usually poor information disclosure. For process simplification and a reduction in fees, you need to organize your financial information so the business evaluator can perform their job effectively.
As long as you’re honest and disclose the necessary information, there’s no reason for the process not to run smoothly.
The Bottom Line
Business owners who own their companies can hide their income to avoid paying income tax. Therefore, the FCSG has set a few rules to declare the actual income for support.
I am an independent business valuation professional with multiple years of experience in the business valuation industry. I have performed valuations for businesses of all sizes and industries and offer various services, including business valuation, litigation support, and expert witness testimony.
If you are going through a divorce and need to have your business valued, I can help. Contact Amano Financial Advisory today to schedule a consultation.
