How to Determine the Value of a Business for a Texas Divorce

 Posted on September 02, 2021 in Divorce

When you are going through a divorce, all of the financial assets you acquired throughout your marriage can be affected by the division of marital property. This can be especially concerning to business owners, who may be at risk of losing their business, or at least a substantial share of it. If you have business assets to divide in your divorce, it is important to work with an experienced attorney who can help you protect them as much as possible.

One important step in determining how a business will be handled in a Texas divorce is obtaining a business valuation. However, different types of businesses may need to be valued in different ways, and you should be sure to understand the option that best applies to your circumstances.

Understanding Different Business Valuation Methods

Not all businesses are created equal. For the purposes of business valuation in a divorce, a publicly-traded business may need to be valued very differently from a closely-held family business, for example. Your attorney can help you work with a knowledgeable financial professional to determine the most appropriate valuation method for your business. Options include:

• Market value - When shares of a business are publicly traded, it is often best to determine the value of your business assets by calculating the total value of the shares that you hold on a designated date. The market value of a business can also be determined based on the recent selling prices of similar businesses in the market.

• Book value - A business’s book value is based on its total assets and liabilities. Using the book value may be an appropriate method for businesses whose operations depend largely on product inventory and equipment. A similar method, known as the liquidation value, is determined based on the current cash value of the business’s assets.

• Value based on revenue or earnings - For businesses that are primarily driven by human capital, like a professional practice or a business based on the owner’s relationships with the community, valuing the business based on its expected income and profits may make the most sense.

The results of a business valuation can serve as important documentation and evidence in negotiations or litigation regarding the division of community property. They can also help you determine whether it is necessary to sell your business in the divorce, or whether you may be able to keep it by allowing your spouse to keep other marital assets of a similar value.

Contact a Frisco High-Asset Divorce Lawyer

At Pfister Family Law, we help clients resolve disputes over business assets and other concerns in high-asset divorce cases. We can work with you to protect your property and achieve a divorce resolution that keeps your professional prospects intact. For an initial consultation with a Collin County divorce attorney, call us today at 972-954-6455.

Sources:

https://statutes.capitol.texas.gov/Docs/FA/htm/FA.3.htm

https://www.investopedia.com/terms/b/business-valuation.asp