Business Valuations in Texas Divorce

While each business is unique, there are a few key documents that you will need for a business valuation. Divorce cases involving business valuations may ask for these items:

• The past five years’ financial statements and income tax returns
• List of assets and debts of the business
• Aged accounts receivable and payable
• Contracts
• Budgets and financial projections
• Marketing materials
• Documents and information particular to the industry

After reviewing the initial information, the business valuator will likely request additional documentation. This will often come as the valuator gains a better understanding of that business and its unique attributes. Collecting these documents may take some time, but it is vital to obtaining a correct business valuation. 

When determining value, by whatever method adjustments may have to be made by the expert to set a more accurate value. Some standard adjustments made in valuing a business are a lack-of-marketability discount due to the recognition that there is little or no market for the stock of a closely-held corporation, and a minority-interest discount which reflects the minority interest owner’s inability to control dividend payments, company policy or liquidation of company assets. 

The appraiser must know that certain factors generally included in the valuation methods must be separately accounted for in a divorce case. The expert must consider the spouse’s goodwill and the willingness of the party not to compete with the business. The value attributable to the goodwill of a divorcing spouse must be excluded from the value of the business or professional practice under evaluation.