A business during divorce: establish entitlements before valuation

1. Create a legal map of the relationship and business

Collect prenuptial or partnership agreements, any changes and documents about the date the business started. Note the legal form, ownership relationships and shareholders or partners. The brand under which you work is less decisive than the legal structure behind which assets, debts and rights are housed.

In the event of a foreign marriage or previous residence abroad, it may first be necessary to determine which property law applies. Do not rely solely on a Dutch standard rule because the company is registered here. Have the principles stated in writing, so that a valuation expert does not calculate for the wrong question.

2. Distinguish ownership from settlement and reimbursement claims

A company can be registered in the name of one partner while a financial claim from the other must still be assessed. Conversely, a marriage does not automatically mean that every part of the company is divided in the same way. The applicable conditions and history are therefore indispensable.

Map personal investments, loans and previous agreements. Make a note of who contributed what money and what documents certify that payment. A bank transfer proves a movement of money, but does not independently indicate whether it was a loan, investment or payment of joint costs.

3. Formulate the assignment to a valuation expert

First ask which asset needs to be assessed: a company, a shareholding or a specific entitlement to a financial settlement. Also record on which date and for what purpose the valuation takes place. A sales exploration and a financial settlement of a marriage are not automatically the same assignment.

Discuss what information the expert receives and what assumptions need to be made explicit. Consider dependence on one person, important contracts and the stability of results. Make sure both parties understand what question the report does and does not answer; This prevents a costly report that ignores the legal core.

4. Distinguish financial figures from forecasts

The Chamber of Commerce describes various valuation methods and the distinction between company-related and personal goodwill. Which method is appropriate must be substantiated. The balance sheet and profit history are valuable sources, but do not always provide a complete picture of the economic significance of the company without correction.

Ask which special items have been adjusted and why. A one-off revenue or exceptional cost item can distort the comparison. Make it clear which expectations are based on evidence and which remain uncertain. A disappointing or favorable prognosis is not an established fact of the future, even if it is stated in a detailed report.

5. Separate value and affordability

A company can represent a value while there is insufficient free money available to immediately pay a full settlement. This does not automatically cancel any claim, but does require a discussion about financing and implementation. Avoid agreements that are only concluded on paper and prove operationally unfeasible.

In case of a deferred payment, ask about security, interest, payment dates and the risk of disappointing results. The position of other shareholders, financiers or partners may also be relevant. A private agreement between ex-partners does not automatically change the obligations that the company has towards others.

6. Hypothetical example: accounting assets and a client practice

Suppose a self-employed person owns little machinery or inventory, but has long-term customer relationships and a profitable practice. The other partner mainly sees the annual income; the entrepreneur points out the low bank balance. Both observations may be correct and yet do not directly answer the valuation question.

An expert will have to investigate what is transferable, how dependent the result is on personal work and what exactly the legal claim includes. This example does not prescribe a goodwill amount. It shows why an account balance, annual profit and business value cannot be treated as interchangeable amounts.

7. Consider tax and implementation before signing

The Tax Authorities provide information about divorce and entrepreneurship. Have a tax expert assess the consequences of the chosen settlement. Shifting assets, shares or liabilities can have other effects than just a monthly payment. Therefore, do not only calculate with a gross agreement amount.

Record which documents are drawn up, who is responsible for implementation and what permissions are required. Have a lawyer and financial advisor review the same version of the agreements. The right to compensation, the valuation basis and the payment plan must be consistent without important risks falling between the different areas of advice.

If shares in a Dutch BV must actually be transferred afterwards, read about the agreements and execution of a share transfer. A monetary entitlement does not automatically require transferring shares.

Practical checklist

• Collect relationship terms, legal form and ownership documents.
• Create a traceable overview of investments and loans.
• Have the legal claim established before valuation starts.
• Ask for purpose, date, method and assumptions of the valuation.
• Discuss financing, security and tax consequences of the settlement.