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San Antonio Business Valuation Attorney
San Antonio Business Valuation Lawyer Serving Bexar County
When you get a divorce, you will need to address numerous issues related to your community or separate property. As you continue with the process of ending your marriage, you will want to make sure you will have the necessary financial resources to support yourself in the future. However, if you or your spouse own a business, determining how to divide your marital assets can become more complicated. In addition to ensuring that you will each maintain ownership of assets that are roughly equivalent in value, you may also need to consider how the value of business assets may increase in the future, how to address income that either party earns through a business, and a variety of other important factors.
During the divorce process, it is important to perform a valuation of any business assets you or your spouse own. This will ensure that you fully understand the value of the marital estate, as well as the financial resources available to each spouse based on assets that are not considered community property. At Brandon Wong & Associates, we can ensure that family businesses will be evaluated properly. We can make sure you will have a complete understanding of the financial issues you will need to address, including any decisions you will need to make about the division of complex assets.
Valuation of Business Assets
Business interests can be very valuable assets, and they may represent significant investments of a person's separate assets, a couple's marital assets, and time and effort by both spouses. When making decisions about the ownership of business assets, the first thing a couple will need to understand is whether a business is part of the marital estate. If either spouse founded a new business or acquired an existing business during their marriage, the business will usually be considered community property. However, a business may be excluded from the marital estate if it was founded or purchased using a spouse's separate property, such as an inheritance they received or money they had saved before the couple was married.
Regardless of whether a business is considered to be community property or separate property, it will still be necessary to perform a business valuation. Spouses will need to understand the present monetary value of the business, as well as the likelihood that it will increase in value in the years to come and the potential profit that could be earned from selling the business in the future. Proper valuation of a marital business will ensure that community property can be divided correctly, while valuation of a separately-owned business will help determine the financial resources available to a spouse, which may affect the decisions made about property division, spousal support, or other divorce-related issues.
Several different methods or a combination of multiple methods may be used to determine the value of a business, including:
- Calculating assets and liabilities - In many cases, the simplest way to determine a business's current value is to add up the value of all of its assets, which may include real estate, equipment and supplies, accounts receivable, and intellectual property such as trademarks or patents. Any applicable liabilities, such as business loans or payments owed to vendors, would be deducted from this total to determine the business's value.
- Reviewing income and projecting future growth - More complex calculations may be performed to review a business's finances and gain an understanding of how it may increase in value in the near future. By looking at revenues and profits, contracts that are currently in place, plans for expansion, and other factors, a valuation may determine the expected benefits a spouse can receive by maintaining ownership of business assets.
- Determining market value - By reviewing recent transactions in which similar businesses were purchased or sold, a business owner may be able to estimate the purchase price of their business and determine the profits they would earn if the business were sold. This valuation method may be appropriate in cases where a family business may be sold during the divorce process.
Business Valuation FAQs
Answer: In a Texas divorce, all of your assets will be classified as either community or separate property so that a judge can divide them fairly. For any businesses you own, thorough appraisals will be required to gain a full understanding of their total value. If your business is under- or overvalued, it could impact the fair distribution of community property.
Answer: Business valuations are usually performed by outside experts such as forensic accountants and financial advisors who use standard methods of appraisal.
Answer: The business’s assets and liabilities, potential for future growth, and the market value of other similar businesses can all affect the valuation of a business in a divorce.
Answer: In general, businesses founded before a marriage are considered separate property. However, a pre-established business can become community property if your spouse contributed to the business with marital funds or labor. If your spouse has a stake in your business, you will need to buy them out in order to maintain sole ownership of the business.
Answer: In a divorce, there are three standard methods of business valuation that forensic accountants often use:
- The Asset-Based Approach: The value of the business will be determined by adding up its total assets and subtracting its existing liabilities, such as debts.
- The Income-Based Approach: The value of the business will be determined by projecting its future appreciation in value after looking at its revenue and profits.
- The Market-Based Approach: The value of the business will be determined based on recent sales of comparable businesses.
These methods are not mutually exclusive. In fact, a professional valuator may use multiple methods to determine a business’s current value and estimate how it may grow in value in the future.
Answer: If your business is valued based on its potential to grow, it could impact alimony and the division of property. For instance, if you started a business that could see an exponential increase in profits, the judge might award a greater share of property to your spouse to make the division equitable, or you could be required to pay spousal support based on the income you are expected to earn from the business.
Answer: Community property refers to assets owned jointly between you and your spouse, while separate property strictly belongs to one party. Even if your business is separate property, it will still have to be valued so that the court can get a full understanding of your assets and financial resources.
Answer: Yes. Any award of community property – including a business or business assets – may impact a judge’s decision on whether or not spousal support is necessary. If your business will be generating a substantial annual income, but your spouse’s income will be limited, you could be required to pay ongoing spousal support.
Answer: The value of intellectual property can be somewhat difficult to estimate, as the valuation often relies on speculation rather than hard figures. Intellectual property (IP) may consist of patents, copyrights, trademarks, logos, written content, and other non-physical property owned by a business.
The valuation of IP is similar to how you would divide the business as a whole. You could consider the IP’s potential to generate future revenue for the business or how much your competitors have earned by selling or licensing similar IP. A skilled divorce attorney can help you gauge the value of your IP and negotiate for a favorable division of the assets you own.
Answer: If a business is sold during the divorce process, the proceeds will be divided fairly between the spouses. The profits could be split 50/50, but other percentages may be appropriate depending on the circumstances. The economic situation of both spouses, the division of other assets, and alimony could all impact how the profits from a business will be divided.
Contact Our San Antonio Business Valuation Lawyers
To learn more about how Brandon Wong & Associates can help you address matters related to family businesses or other business investments during your divorce, contact us at 210-201-3832. You can also submit an online contact form, and we will get back to you as soon as possible to arrange a consultation.
From our office in San Antonio, we provide legal help to clients throughout Central Texas, including Converse, Seguin, Selma, Windcrest, Schertz, Live Oak, New Braunfels, Alamo Heights, Balcones Heights, Castle Hills, Hollywood Park, Shavano Park, Leon Valley, Helotes, Boerne, Bexar County, Comal County, Kendall County, Guadalupe County and Medina County.
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