The Business Interests section of a Financial Statement is often what I call a “work-in-progress”.
In today’s economy, it is common that a spouse will be self-employed, working for his or her own sole proprietorship or a partnership. This partnership can be with the other spouse or a third party.
Also, on the advice of an accounting or legal professional, a spouse may have incorporated one or more companies in order to maximize tax planning or to protect family assets from business creditors. These are often referred to as “private” or “closely held” companies.
Determining a value for such a business interest can be an involved process. At the start of litigation, often the party who owns this type of asset will claim that it has little or no value. Until an amount can be agreed upon or determined by a valuation, the term “to be determined (tbd)” can be inserted into a Financial Statement.
Regardless of how relevant or active you may perceive these companies, it is important that you fully disclose the existence of all of your business interests. As discussed earlier, failure to do so may have a significant impact on you if it is discovered by the other side through independent research.
It is the sole obligation of the spouse who has a business interest to produce all pertinent information to support his or her value. These can include:
- in the case of an unincorporated business, personal Income Tax Returns, which must include a Statement of Business Activities
- provincial and federal tax returns for each corporation
- Financial Statements, often prepared by the company’s accountant
- copies of any Agreements, such as Shareholder’s or Partnership Agreements
- bank and credit card statements
After reviewing this documentation, the non-titled spouse will have to decide how much will be invested, in both time and money, to establish a value.
As with real property or pensions, a valuator may have to be retained to establish a value. Depending on the nature of the business and its potential worth, this can include an accountant or a Certified Business Valuator.