Often in Texas divorce cases, lawyers are tasked with determining the divisible interest in a professional corporation.  This involved determining the individual’s interest in the corporation and then obtaining the value of the interest.  Often a CPA with experience in divorce litigation as well as valuation of business entities is hired to assist in this endeavor. A new recent case out of the Fort Worth Court of Appeals illustrates the complexities of dividing a professional’s interest in a corporation. 

The husband was a non-CPA partner in KPMG, a national CPA firm. He joined the firm as a shareholder and borrowed money from a third-party lender for his buy-in to the firm.  This buy-in funded the husband’s capital account.  The membership documents defined the value of the interest in the corporation as being the value of the capital account. In spite of the definition of the valuation method of the interest in the company, wife’s expert testified that husband should also have an interest in the professional goodwill of the company independent of the interest in the company.   

Goodwill that exists separate and apart from a professional’s personal skills, ability, and reputation is divisible upon divorce. To determine whether goodwill that is subject to division upon divorce attaches to a professional practice, first, goodwill must be determined to exist independently of the personal ability of the professional spouse, and then if such goodwill is found to exist, the court must determine whether that goodwill has a commercial value in which the community estate is entitled to share. While a partnership agreement is only a factor to consider in the present value of the partnership interest, the questions of whether a business possesses goodwill and if so, what the value of that goodwill consists of, are fact questions for the trier of fact. 

The trial court determined that wife’s expert lacked credibility and disregarded his valuation method, instead opting for the method of valuation stated in the membership agreement and testified to by the national director of husband’s company. So, husband’s capital account was the value of the loan proceeds minus the remaining balance on the loan. 

Hill v. Hill, 02-12-00332-CV, 2014 WL 92795 (Tex. App.—Fort Worth 2014, no pet. h.) (mem. op.) (1/9/14).

 

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 30+ years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 30+ years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW for multiple years. She was named one of the Best Lawyers in America and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.