Frequently clients ask about their Dallas Texas divorce why we have to get a forensic CPA expert to value their closely-held business to get them divorced.

In Texas, there are three parts to dividing property in a divorce:

  1. Characterization — is the asset community property (property obtained during the marriage) or separate property (property owned before the marriage or through gift or inheritance)
  2. Valuation — assessing the value or net worth of each asset to assist in determining what is a fair division of property
  3. Division — the physical aspects of sorting assets to each party

In order to dispense a "just and right division" of community property in a Texas divorce, the judge has to know how much each asset is worth.  In other words, until each asset has a dollar value, neither the judge nor the parties can know whether the division awards 50% of the assets to each party or some other figure. 

In a divorce with a business interest, the first step is to decide whether the business entity is community property.  This can be more complicated than just whether the business was started during the marriage.  Important questions include what was the source of funds used to start the business, did the business change formations during the marriage, and whether any community funds were put into the business during the marriage if the business was started before the marriage.  Also, consider whether the customers of the business come to the business due to the reputation of the business or the reputation of the spouse/owner.

Then the business must be valued according to appropriate principles to be used during a divorce.   In the market valuation approach, the CPA estimates your business’s value by comparing it to a similar business that has been sold recently. The income approach estimates the value of the business by converting profits or cash flows into value. The asset approach estimates the value based on the values of the assets and liabilities of the business. Note: the "book value" of a business, which is the assets minus the liabilities on the balance sheet, is not a valuation method used by professional business valuators.

Not just any CPA is qualified to conduct a business valuation in a Texas divorce.  The expert should be certified by the American Institute of CPAs in Business Valuations.  The letters after the CPA’s name should read "ABV".  This accreditaion assures the divorcing spouse that the CPA has a minimum level of expertise in the relevant principles of valuation. If an expert is under-qualified to give an opinion on valuation of a business, the expert may not be allowed to testify at trial.

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 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 27 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, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, 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. She was named one of the Best Lawyers in America for 2016 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.