How do you put a fair price on your business during a divorce?

On Behalf of | Apr 3, 2020 | Uncategorized

Whether you built your company from the ground up or inherited from a family member, your ownership of the business matters to you. You may want to keep the business in your family long-term or could even have dreams of selling the company in order to fund your retirement. Those plans could easily go up in smoke if you wind up forced to liquidate the business or share its ownership with your ex as part of your Texas divorce.

If you want to protect your ownership interest in the business, you need to begin strategizing as soon as you know that your marriage is likely over. In many cases, a business you start or run during your marriage, particularly if you invest marital assets in it, may be subject to property division laws, which requires that you put a price on the business before you begin negotiating or litigating your divorce.

Business valuation is a complex process

In order to determine what your company is worth, you will need to look at its revenue, its assets and its liabilities. It is common for those attempting to value their business to also project estimated future revenue levels as well. Doing so can make the business appear more valuable to potential buyers, investors or even lenders who may consider the business itself as collateral.

Unlike in a business transaction where the ideal is to maximize the value of the business, you may want to take a different approach during divorce by highlighting your debts and ongoing expenses in order to minimize the value placed on the business. Depending on the nature of the business, there are several unique systems that you can use to generate a price.

Identifying liabilities and pressing to retain ownership are solid strategies

Real estate that you own will generally be an asset, while a rental contract is certainly a liability, as it is a bill you have to continue paying. Staff salaries are another significant liability that can drastically impact the actual profit that your business generates.

By demonstrating both the current value of the business’s assets, liabilities and its likely future revenue, you can put a reasonable price on your business, which can then be a starting point for negotiations as you proceed with your divorce.

Knowing what your business is worth is only one step of the process. You will likely have to engage in intense negotiations or careful legal planning in order to protect your interest in the business without it drastically impacting other areas of the asset division process.