How to Determine the Value of a Family Business in a Texas High Asset Divorce

 Posted on July 13, 2022 in High Asset Divorce

One of the most complex parts of a high asset divorce is the division of assets and property. This division becomes even more complex when there is a family business involved. Since Texas is a community property state and in order to ensure the division of the marital estate is equal, it is critical that the parties have an accurate dollar amount of the company’s value.

How Is the Value of a Family Business Determined?

There are three types of methods that high asset divorce attorneys can use to determine the actual worth of the business – asset, market, or income valuation. Business valuations are usually conducted by either a certified public account (CPA) or an appraiser, and that person will determine which of the three approaches will work best for your family business.

With an asset valuation, all of the assets of the company are listed. This includes the intellectual, the physical, and the personnel. This is the best type of valuation for companies that are fairly young and has not really begun showing a profit yet.

When valuation is done by using a market approach, a valuation professional will estimate future earning potential by the company’s place in the market.

If the third type of valuation is used – the income approach – the valuation professional will estimate the company’s future potential and then adjust down to come up with current values.

Goodwill and the Family Business

One factor in a business valuation that can be complex to determine is the goodwill asset. In business, goodwill usually refers to customer loyalty due to the owner and/or the employees of the business. If one of the spouses had more of a significant impact in the goodwill factor over the other spouse, there is value in that “asset” and that value could be deducted from the company’s overall value.

Contact a Travis County High Net Worth Divorce Lawyer

If you and your spouse have decided to end your marriage, you need to have a skilled and seasoned Austin, TX complex divorce attorney aggressively advocating for you to make sure your right to your fair share of the marital estate is protected.

Even the friendliest of divorces can quickly become contentious when there are high assets involved. Call Powers and Kerr, PLLC today at 512-610-6199 to schedule a confidential consultation. Our firm will work diligently to ensure all assets, including the family business, are properly valued and accounted for.

Source:

https://www.familybusinessmagazine.com/article-category/valuation