Business Valuations in Texas Divorce

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Understanding Business Valuation in a Texas Divorce

When valuing a closely-held business, it is essential to have a thorough knowledge of the measures of value, the methods of valuation, and Texas case law. During a divorce, business valuation relies on well-established methods, procedures, and guidelines that must be followed. The choice of the method to be used depends on the type of business being valued and the judgment of the appraiser.

How Is a Business Valued in a Divorce?

The deciding factors of how to value a business for divorce are obtained from either the assets of the business, its earning capacity, or a combination of both. Although there is a great deal of subjective judgment involved, the appraiser should rely upon specific generally accepted methodologies and restrictions imposed by established case law. 

During a Texas divorce, valuing a business, especially a closely-held one, usually follows three main approaches: 

  • Net asset value/Cost approach 
  • Market approach
  • Income approach

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What Documents Will a Valuator Ask For? 

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. 

What Adjustments are Made During Business Valuations? 

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. 

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Why a Goranson Bain Ausley Attorney? 

At Goranson Bain Ausley, our attorneys offer considerable experience with business valuation cases. We understand the complexities of closely-held businesses and the financial and emotional issues that arise when they must be assessed for division. Our attorneys will guide you through the process of divorce and business valuation, working to protect your investment in your businesses, present your case persuasively, and strive to arrive at terms that represent a favorable resolution. Contact us today. 


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