How to value a company for divorce. Husband set it up and owns it. I’m not a shareholder.

[Iceland22]

Any idea how I know (even roughly) how much it’s worth to work out my divorce settlement?

There’s £157k cash in the bank, little debt.
He pays himself minimum wage but through dividends earns £50k.

I have no clue how to get it valued. Or, how much it’s worth - any ideas? X

Do you have a solicitor? If so, take advice from them. You may also need advice from an accountant. No-one can tell you what the business is worth from the information you've posted. However, if the business doesn't own anything and is simply a vehicle through which he provides his services it may not have any value.

Worth nothing at all? How can that be? He built the company while we were married and I had the kids. It does, and will in the future pay a decent salary and make money.
Could I be entitled to nothing at all from it?

It is worth at least £157K (less any obligations). But in terms of value suppose your husband left the company (say he retired). Could the company continue in those circumstances? Does it have employees apart from your husband? If not then it is more a lifestyle business and has no intrinsic value. On the other hand if the company has products, property (intellectual or physical), a team of employees providing services, then it has value.

Forensic accountant, ask your lawyer.

It's quite complicated, it's normally an ebitda multiplier. So earnings before interest, tax, depreciation and assets. You'll need an accountant if you've not valued a company before.

However be careful, if you ask for half the value it may send it into liquidation. The cash assets may offset many things, inc inc bills due in and simple running costs, it's not or shouldn't be profit. It's not valued at what's in the bank, that's daft. That is simply it's cash flow/assets.

it can be complicated. Is it a limited company ? You could look at the value of the shares ?

Yes it’s limited.
I just wanted some idea before I start the whole divorce process. I need to see if I can afford to live in the house afterwards.

Thank you everyone I wish I had a crystal ball x

I don’t want the company I would prefer the house equity.

Do you have the accounts? If so the ebitda should be declared, take a three multiplier, you could be in the general ball park.

However, if it's a company that can't be sold, the value is your husband himself and the work he does, it becomes much more complex and the multiplier would be much lower. There are also a huge amount of other factors, from inventory through to cash flow, through to contracts and assured income that will impact. In addition could he fold it and start again if he personally is the value and as such it would then be worth nothing.

If I was to keep it simple I'd say unless you're due child maintenance, and if you're looking at this as spousal support, then you may have a lengthy battle on your hands to say you're entitled to any of it, especially if it's effectively he's self employed and simply puts his earnings through a limited company for the tax benefits.

Your reaction to my first post suggests that the company is indeed a vehicle for offering his services which would collapse if he stopped working for it. In that case the value of the business may be just the assets less the liabilities. For it to have any value beyond that it has to be possible for him to sell the business to someone who would be able to take it over and continue to operate it. If the reality is that the clients would all go elsewhere if he stopped working for the business a sale of the business is not possible.

The income from the business will be taken into account as part of your settlement. You may be entitled to something from that. But, without knowing a lot more, no-one can say whether you are entitled to a slice of the business or what that would look like.

You need to consult a solicitor.

By the way, if it is a small business the accounts may not show EBITDA at all. And if the business is purely his services, EBITDA multipliers are pretty useless in valuing it. Even if it is not just his services and the figure is in the accounts, an EBITDA multiplier may not give the right answer. Then there is the issue that EBITDA is not regulated by UK GAAP (generally accepted accounting principles) so it is up to the directors to decide what to include, allowing them some scope to manipulate it.

You need professional advice.