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Valuing a business in a divorce

| May 6, 2020 | Divorce |

Business owners often regard their company almost as a child. It must indeed be nurtured, and the staff must be taken care of. Still, filing for divorce often forces owners to also consider who should maintain primary “custody” of that business that may qualify as community property. This prompts both sides to take a clear-eyed look at what the business is worth. This can be done with the idea of using that valued amount as part of the equation for dividing community or marital assets.

The process is complex

Several factors are used to determine the fair value of a company. These include looking at the amount of income, the accumulation of assets (including buildings and property), the amount of debt and liabilities burdening the company, and the fair market value, as well as the intrinsic value of the business. It is also useful to look at the potential for future earnings and when the valuation was conducted, because some businesses have cyclical economic peaks and valleys.

These factors all go into determining an accurate appraisal of value, but the potential future earnings numbers involve guesswork based on knowledge and experience. While they both may be business or legal professionals, two individuals will likely not arrive upon the same amount. Either a judge will then need to assign a value, or the two sides will need to agree upon an amount.

Not all attorneys handle divorces with businesses

Disagreements over the value of a business, or even a strong understanding of how the company in question works, generally benefit from the services an experienced Board-certified Family Law expert attorney who regularly handles divorces involving businesses in Collin County, Dallas County, Denton County, Midland County, Ector County, and surrounding areas of the state. Not only do they understand how business works, but they can also work with forensic accountants and business appraisal experts in order to determine if an owner is attempting to hide assets or otherwise under-value or over-value a company.

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