Community Property in Divorce
Accurately evaluating the true value of a small business, professional practice or large company is critical to achieving fair property settlements no matter which spouse you are representing.
The value of a business interest or family-owned business in a divorce case differs from a traditional valuation used for the sale of a business to third parties based on rules of law concerning personal goods, and rules concerning a person’s ability to freely compete with that business post-divorce. Because of these differences, discounts in value may be applied differently in a divorce case.
Because of the unique circumstances of dividing business assets in a divorce, having a skilled lawyer on your side who knows how to handle this heavily litigated issue is often a critical component to the outcome of how the entire community estate will be divided in divorce.
In a divorce, the valuator has to assume that personal goodwill is not an asset of the community estate and therefore cannot be included in the value of the business. The valuator must also assume that a party can freely compete with his spouse after divorce. The ability to compete can result in a significant discount in the community value of a business.
Contrary to this rule in a divorce, most arms-length sales of business include a value for non-compete agreements between the purchaser and seller of the business. Our firm works with business valuation specialists in the context of divorce cases who can evaluate, compare and contrast results achieved through approaches involving:
- Market comparison
- Adjusted book value
- Asset tracing and characterization
- Income approach
- Liquidation value
Helping You Understand Every Detail
Of course no matter how the business valuation is conducted, the division of marital assets and debt can become a battle of experts that cost both spouses a significant amount of money and aggravation. For this reason, we emphasize weighing the cost of litigation against the value of the estate to be divided and the potential outcomes that can result from retention or foregoing retention of expert witnesses.
Whether a person seeking to retain a business wants a lower valuation or the other spouse wants to ensure that the valuation takes into account every asset so the maximum value can be used, negotiation and seeking qualified experts are key factors in arriving at a fair outcome. Since valuations are subject to significant opinion, it is critical to have experienced counsel on your side to help protect your interests and rights in and outside the courtroom. We not only have experience in this area, but we routinely work with recognized experts who are trusted and knowledgeable.
Call our McKinney, Texas, law offices directly to schedule a consultation regarding your questions surrounding business ownership or professional practice valuations or you can e-mail us with a brief description of your situation and concerns and someone will promptly be in touch. Our lawyers accept all major credit cards and offer flexible appointment scheduling for your convenience.