Documents needed for a family law business valuation

A business valuation is only as good as the documents behind it. A valuer can reason carefully, choose the right method and explain every step, but if the earnings are taken from an incomplete set of accounts, or the ownership is assumed rather than read from the deed, the figure rests on sand. This article lists what a valuer generally needs to value a business for a family law matter, what to hold back at the start, and what to do when something is missing.

Why the documents decide the quality of the report

The valuation of a privately owned business turns on a handful of questions: what it earns, what the owner is paid, what it owns and owes, how it is held and how far it depends on the owner. Each is answered from documents. The financial statements show the earnings and the balance sheet. The tax returns confirm them and reveal the adjustments already made. The ownership documents show what interest is actually held and what rights go with it. Without them the valuer is guessing, and a guessed figure is exactly what the parties came to the valuer to avoid.

Documents also determine speed. The draft Settlement Valuation report is delivered within 5 to 7 business days after payment and receipt of all required information. The period does not start until the checklist is complete, so the fastest way to a report is a complete set of documents at the outset.

The core financial documents

For most businesses the starting point is the financial statements for recent financial years, usually the last three, together with the income tax returns for the same years. The statements show the profit, the balance sheet and the notes; the returns confirm the figures and show items such as depreciation and related-party payments as the tax office saw them.

To bring the picture up to date, the valuer needs current-year management accounts or, at least, a recent profit and loss statement and balance sheet. Where financial statements have not yet been prepared for the most recent year, business activity statements can fill part of the gap. Loan statements, lease agreements and hire purchase or equipment finance contracts show the debt and the commitments the business carries.

Ownership and structure documents

What is being valued depends on how the business is held, and the valuer needs the documents that show it. For a company, the constitution, a current ASIC company extract and any shareholder agreement. For a trust, the trust deed with every variation, and the identity of the trustee, the appointor and the beneficiaries. For a partnership, the partnership agreement. Where the business runs through several entities, a diagram or a plain description of how they connect, with the loans and charges between them, saves a great deal of time and prevents anything being counted twice or missed.

These documents matter more than people expect. A shareholder agreement may restrict the transfer of shares or fix a price on exit. A trust deed may show that the person thought to own the business has no fixed entitlement at all. The valuer reads them, and the report explains how the structure affects the value of the interest.

Operational documents

The valuer also needs to understand how the business runs. The premises lease, and any option to renew, shows the security of the location. Key customer and supplier contracts show the durability of the revenue. A list of staff and contractors, with roles and pay, shows who does the work and whether the owner's own labour is fairly reflected in the accounts. A short description of the owner's role, hours and duties, in their own words, is one of the most useful documents in the set. Any franchise agreement, licence, accreditation or regulatory registration the business depends on should be provided, along with whether it is held by the business or by a person.

Related-party information

Family businesses pay family members, rent premises from related trusts, borrow from and lend to their owners and carry private expenses. None of that is improper, but all of it has to be identified so the earnings can be normalised. The valuer asks for wages or payments to family members and what they do, rent, management fees or loans between related entities, and private expenses run through the business, such as vehicles, travel and phones. Where the accountant has already prepared a schedule of these items, that is ideal.

What not to send at first

Because a conflict check has to be completed before a matter is discussed in detail, and because a valuer does not need them, certain material should not be sent until it is specifically requested: affidavits and court documents, personal correspondence between the parties, medical, psychological or other personal evidence, personal bank statements, and anything a lawyer has marked confidential or privileged. If one of these later becomes relevant, for example a court order that fixes the valuation date, the valuer will ask for it. Sending it unasked does not speed anything up and may create difficulties for everyone.

When a document does not exist or cannot be obtained

Not every business has every document. Some sole traders have never had financial statements prepared; the tax returns may have to do. Some trusts cannot find the original deed. Some records are held by the other party or by the business's accountant and are not being handed over.

The right response is to tell the valuer what is missing and why. Some gaps can be worked around, and the report will explain how. Others cannot, and the report will say so and explain how the gap was treated, so that anyone reading it knows what the figure rests on. What the valuer will not do is fill the gap with an assumption and present the result as if it were complete.

Where a document is held by the other party, obtaining it is a matter for the parties and their lawyers. The valuer can identify what is needed but does not chase the other side for it.

Getting the documents together

A few practical suggestions. Ask the business's accountant for the financial statements and tax returns in one set; they will usually have them filed together. Provide the documents through the process we confirm with you rather than in a long chain of email messages, so that nothing is lost. Label files by year and type. If a document exists only on paper, a clear scan or photograph is fine. And if you are not sure whether something is relevant, ask rather than guess; a short note listing what you have is often the quickest way to a complete checklist.

Where to from here

You do not need every document to enquire. The confidential enquiry form asks for basic information about the business and the matter, and once the scope is confirmed we send a checklist tailored to the business. A Settlement Valuation at $2,495 + GST is prepared from these documents for negotiation and mediation. Where an expert report for court is required, the documents are usually provided through the instructing lawyers as part of a Family Law Expert Valuation $4,495 + GST. The full process is described on the How it works page.

This is general information about the documents used in a family law business valuation. It is not legal advice. Disclosure obligations between the parties are a matter for the parties' lawyers.