Business Valuation and Divorce Business Valuation in Canada | PIN.ca

Empirical Foundation & Core Valuation Problem

The following independent global institutions provide the empirical foundation for the 68% Intangible Asset Midpoint used in this forensic business valuation for divorce. These authorities confirm two critical realities:

1. Intangible assets now represent the majority of business value.
2. That value is conditional and may or may not survive separation from the operating spouse.

Independent Institutions Supporting Intangible-Heavy Value

Glossary of Forensic Valuation Terms (Divorce-Specific — 2026)

Knowledge-Based Capital (KBC)

Intangible assets that generate future economic benefit without physical embodiment. May be enterprise-based (divisible) or personally embedded (non-divisible). Distinguishing between the two is essential to equitable division.

Stranded Assets (Assets-at-Risk)

Assets that lose value when separated from the operating ecosystem that sustains them. If the operating spouse exits and the business cannot function independently, assets may become stranded and reduce the business to liquidation value.

Operating Spirit (Going-Concern Core)

The functional DNA of a business, including systems, processes, and customer trust. Produces earnings above industry norms. If the Operating Spirit leaves with the spouse, the going concern may cease to exist. If it remains with the entity, intangible value survives.

Intangible Residual

The value remaining after deducting tangible assets. May persist, shrink, or collapse to zero depending on transferability and survivability.

Technical Obsolescence Risk (Factor #7)

Risk that a business’s core value driver is being replaced or overly dependent on a single individual. Owner-dependence is a form of obsolescence risk. If the owner exits, business value may disappear.

Intangible Value Under Stress

The Scale of Global Assets

As of 2026, approximately 68% of global business value is intangible. In divorce proceedings, that value is frequently overstated, understated, or entirely missed.

Divorce reframes the valuation question from: “What did this business earn?” to “What would survive if this spouse left?”

Why Traditional Valuation Approaches Fail in Divorce

• Market Approach: fails where transactions are hypothetical or where the business is effectively unsaleable without the operating spouse.
• Asset Approach: assumes assets retain value independent of operation — often false in owner-dependent businesses.
• Income Approach: projects earnings without testing dependency on a specific individual; where owner-dependence exists, projected income may be illusory.

Forensic Valuation Requires Survivability Testing

Intangible assets cannot be presumed. They must be:

• Identified
• Measured
• Weighed
• Stress-tested for post-separation survivability

This is the purpose of the Eric Jordan 25 Factors Affecting Business Valuation, applied in conjunction with the 5 Senses Inspection Report. This methodology does not assume value — it proves or disproves it.

Experience Is Not Optional — It Is Functional

Assessing whether a business survives the loss of its operating spouse cannot be done solely from financial statements. Expert judgment under complexity relies on pattern recognition developed through direct operational experience.

Evidentiary Consequences in Divorce

A valuation that assumes intangibles where none survive, or ignores intangibles that are transferable, produces inequitable outcomes. Courts require explainable, testable evidence — not valuation assumptions.

Conclusion

In divorce, business value is not fixed. It may increase, decrease, or collapse entirely depending on whether revenue, systems, and relationships are transferable to the business or remain personally attached to the operating spouse. Only forensic valuation can distinguish between the two.

Business Valuation Perspective (Canada-Wide)

Below is the content re-expressed so it works across Canada, while preserving the valuation logic.

1. What “family law” is (and is not) in Canada
   • Canadian family law is divided between federal and provincial jurisdiction.
   • Divorce Act (Canada) governs divorce and related support and parenting issues for married spouses.
   • Provincial/territorial legislation governs: unmarried partners, parenting outside divorce, property division, support enforcement/variation.
   • No single national “Family Law Act”; each province/territory has its own framework interacting with the Divorce Act.
   • For valuators: key issues include support obligations, income determination, and imputation where earnings flow through a business.
   • Property division is governed by provincial legislation (not the Divorce Act).
2. When family law matters to a valuator (Canada-wide)
   • Trigger is a support claim requiring income analysis — not divorce itself.
   • Common context: relationship breakdown + child/spousal support claim + business/professional income.
   • Divorce not required; both married and unmarried partners may generate valuation work.
   • Many engagements arise in negotiation/mediation; focus is typically on income, not asset division.
3. Married vs. unmarried partners (valuation consequences)
   • Married spouses may claim support under the Divorce Act and sometimes provincial legislation.
   • Unmarried partners rely on provincial law.
   • Support analysis is functionally similar; business income is assessed regardless of legal status.
   • Property rights vary by province, but income analysis generally does not.
4. Support as the core valuation driver
   • Canadian family law regimes are support-driven (not equalization-driven).
   • Key question: “What income is actually available to pay support?”
   • Often requires normalization, looking beyond reported tax income, and assessing economic reality.
5. Business interests under Canadian family law
   • Businesses matter because they generate income, not necessarily because they are divided.
   • Structures: private corps, professional corps, partnerships, sole props, holding/management companies.
   • Court focus: retained earnings, control, expense discretion, non-arm’s-length transactions, personal expenses.
   • Legal ownership does not control income attribution.
6. The family home (limited valuation role in support cases)
   • Primarily relevant to property division; may influence housing needs/costs and hardship arguments.
   • Usually secondary for income determination unless tied to cash flow/debt service.
7. Income vs. value (where provincial law and the Divorce Act intersect)
   • Engagements overlap: support analysis under Divorce Act (married) and provincial statutes (unmarried).
   • Tasks: income normalization, owner compensation, salary vs dividends, retained earnings, sustainable income.
   • Core question: “What income should be used for support purposes?” (not “What is the business worth to divide?”)
8. Agreements and contracts (valuation modifiers)
   • Domestic contracts may: fix income assumptions, limit/waive support, specify valuation methods.
   • Challenges often arise from unfairness, nondisclosure, or flawed assumptions—making valuation evidence critical.
9. Why family law matters to valuators in Canada
   • Family law is a valuation battlefield because it governs income reconstruction, imputation, and ongoing obligations.
   • It does not govern how business value is divided (provincial property statutes do).
10. Valuation bottom line (Canada-wide)
    • Support-focused, income-driven, fact-intensive, highly dependent on business cash flow.
    • Federal law governs support for married spouses; provincial law governs support/property for unmarried partners.
    • Valuators are engaged to uncover true earning capacity, not just reported income.