Business valuations when going through a divorce: why figures are often challenged
20th April, 2026
Going through a divorce is extremely difficult, and it can become more complex if business assets need to be split between you and your ex-spouse.
Businesses are one of the most valuable assets in divorce. They are classed as both a major capital assets and income source. They provide long-term economic value and are typically used to generate revenue for more than one year. They can also act as an income source for employees in the form of salaries, to pay operational costs and for profit to be reinvested into the business or paid out to owners or shareholders.
At Ward Hadaway, we understand that the divorce process can seem daunting, but with the right legal advice from expert divorce solicitors, the process can be smoother and less stressful to navigate.
Why are businesses an important asset in divorce?
If you are about to begin the divorce process, or are already going through divorce, you may often wonder what happens to a business you built before marriage?
Typically, businesses are classed as part of the matrimonial pot, meaning they will be shared as an equal asset between both partners, regardless of who owns or operates the business. If your business was started or has grown significantly during the marriage, then it will be classed as a matrimonial asset. If both parties contribute to the business, the split can become more complex and legal advice from specialist divorce solicitors at Ward Hadaway should be sought to guide you through this complex process.
However, if a business was established long before the marriage, or was inherited, it may be classed as a non-matrimonial asset. This means that if matrimonial assets are sufficient to meet specific financial needs, the business, as a non-matrimonial asset, may be retained by the spouse who acquired it.
How are businesses valued during divorce?
As a matrimonial asset, businesses represent significant value and an income source. They are also considered as illiquid assets in divorce because the value of a business is tied up in assets, reputation or future earnings, rather than readily available cash. This means that businesses should not be valued in the same way that other assets, such as a residential property.
Businesses with different structures are dealt with differently. Understanding your assets and the impact of divorce is critical when you are dealing with business valuations.
Sole Proprietorships
This type of business is essentially an extension of the owner, like freelancers, consultants or sole traders, and often has little to no value beyond the income it generates. In these cases, a formal valuation may not be needed because the business is primarily a vehicle for the owner’s work rather than an asset that can be either divided or sold.
Partnerships
The situation becomes more complex if businesses have one or multiple partnerships and therefore, it is important to consider partnership agreements which may restrict the sale or transfer of shares. If this type of agreement exists, valuations may focus on the spouse’s individual earnings and their ability to obtain income from the partnership.
Limited Companies (Ltd)
The valuation process is more detailed for limited companies, since if a spouse is a sole or majority shareholder, the business may have significant value independent from their involvement. The company’s assets, liabilities, contracts and overall profitability will be considered, but in cases where the business is co-owned by both spouses or has multiple shareholders, the specific value of the shares held by the divorcing spouse must be determined.
For limited companies, the complexity of the valuation process increases if the company has tangible assets like property, equipment or intellectual property, since these must all be valued separately.
A financial appraiser will look at all business assets, earnings and the structure of the business to provide a precise and up to date valuation that considers all current financial aspects of a business, as well as any expected future profit. A valuation will also consider growth potential and any intangible assets before coming up with a final sum.
There are three primary methods which are used when conducting business valuations for divorce. These are used to determine a company’s fair market value and include:
- Future Maintainable Earnings (Income Approach): this is the most common method which estimates the company’s future profitability based on past performance. An industry-specific multiple is then applied to these earnings, and it is most often used for established, profitable companies with stable revenue streams.
- Net Asset Method (Cost Approach): this method determines a company’s worth by calculating the total value of assets, including property, cash and stock, minus all liabilities. This is primarily used for asset-heavy companies, like real estate or holding companies, and it reflects the minimum value of a business.
- Market Approach: this method values a business by comparing it to similar companies, recent transactions or industry benchmarks, determining fair market value by using metrics like Price/Earnings, EBITDA or price-to-revenue ratios.
At Ward Hadaway, we understand that going through any divorce is difficult, but it may become more stressful if business valuations are needed asthey can be complex.
Our divorce solicitors have extensive experience in dealing with high-conflict divorces, meaning we can provide you with the legal advice and representation during this difficult time, including support on approaching a business valuation or if you are wondering who gets the business in the event of divorce.
Why are business valuations often challenged during divorce?
It is common for business valuations to be challenged during the divorce process and associated proceedings, usually because a business is one of the most valuable matrimonial assets and can be complex and subjective.
Hidden income or assets
The income or assets of a business may be challenged if someone believes assets have been undervalued, income has been unreported, there has been a transfer of assets to third parties or excessive owner compensation, or assets are suspected of being hidden in offshore accounts.
These assets can be challenged through forensic investigation, formal discovery and disclosure, third-party disclosure orders, freezing orders and setting aside transactions. An expert must be used to challenge these assets or the business valuation itself.
Hidden assets and divorce can complicate legal proceedings and may lead to costs consequences
Future income potential
This is often a central factor in business valuations during the divorce process because courts must distinguish between the capital value of the business, which is subject to division, and the owner’s personal earning capacity.
Future income potential tends to be challenged if there is a risk of using the same income stream to calculate both the value of the business and spousal maintenance, or if the valuation is heavily reliant on the personal reputation and skills of one partner.
If significant discrepancies, unusual company structure or liquidity concerns are raised, then future income potential may be challenged.
Disagreements over worth
Any disagreements over the worth of a business are typically challenged after the initial financial disclosure and after a Single Joint Expert (SJE) has produced a preliminary valuation report. Disagreements arise if one partner believes the valuation is too low, too high or based on inaccurate or incomplete information.
Because of this, courts expect the expert’s reasoning to be transparent, but if it is suspected that the expert missed something, then this issue can be either raised in court or a second opinion can be commissioned.
Ward Hadaway’s divorce solicitors can support with business valuations
Dealing with divorce can be extremely stressful, and these feelings can be heightened if you must organise business valuations to ensure your assets are divided correctly.
At Ward Hadaway, our divorce solicitors are here to help you with business valuations in divorce, including how to deal with assets and figures being challenged by your ex-partner. Our support can help you with reaching an amicable divorce and working towards rebuilding your life post-divorce by ensuring you receive a fair split and that your rights are protected throughout the legal process.
Contact us for a confidential chat.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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