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Business Ownership, Valuation and Division in Divorce
Determining the Accurate Value of Business Assets in a Divorce
Many of the most complex divorces involve situations where one spouse owns a business or a family business is involved. There are many things that occur throughout the course of a marriage that can have an impact on how business assets are categorized in a divorce agreement, making it crucial to have a skilled attorney representing your interests.
At O'Neil & Attorneys in Dallas, we have the skills, experience and resources necessary to properly valuate businesses and other high-value assets, maximizing the property settlements for our clients. To discuss your situation with a family law attorney known for her tenacious yet compassionate representation, call 972-499-4558 or toll free 866-959-4330.
Business Assets and Community Property
One of the challenges in valuing business assets during a divorce is determining whether a business is community property. The difference can mean thousands, even millions, of dollars to spouses and their families. Often times, one party thinks the business is an asset not eligible to be divided as part of the divorce only to find out that something occurred during the marriage — such as a refinance, change in business entity, incorporation, etc. — that converted the business to community property.
This can have devastating effects on family-owned businesses, as a business that has been in a family for decades can be subjected to division in a divorce, creating a difficult, even unworkable, ownership situation.
The best approach to such valuation is to hire an independent business appraiser—a CPA with an Accredited in Business Valuation (ABV) credential or a certified professional, like a Certified Business Appraiser (CBA) or someone recognized by the American Society of Appraisers (ASA). Such expert will begin by obtaining all business books and records, tax returns, and financial statements and reports for at least the last five years.
Using this data, the appraiser will determine the company's intangible and tangible net assets, an appropriate rate of return for them, and will calculate excess earnings in accordance with various accepted methods.
After finding a proper capitalization rate for the excess earnings (that which remains after taking into account normal costs, return on assets and salaries), the appraiser can place a value on the most contentious aspect of business valuation, the intangible asset known as "goodwill."
"Commercial goodwill" is the capacity of a business to attract new customers, or keep old ones due to great locations, a reputation for superior service or skill, or anything else that influences a person, supplier or other business to continue a commercial or professional relationship. "Personal goodwill" describes the nontransferable ability of an individual to attract and maintain customers or clients due to his or her skill or reputation for honesty, intelligence, craftsmanship. The value of each of these types of intangible assets can impact the overall value of the business for divorce purposes.
Protect Your Rights — Contact a Texas Family Lawyer
To learn more about how we can protect your property rights and maximize your property settlement in a divorce, contact us today.