business-valuationDid you know that businesses with fewer than 500 employees account for over 99% of all employer firms in the U.S.? And, very small businesses with fewer than 20 employees account for half of the country’s nonfarm GDP and have generated 60-80% of the net new jobs over the past decade?

For the entrepreneur of a small company the family business is another asset in the marital estate that is subject to division upon divorce in Texas. Once the entity is evaluated by a forensic CPA and a value assigned to the community property portion of the asset, the typical division will provide a lump sum payout to the uninvolved spouse at the conclusion of the divorce.

A business consists of tangible assets like buildings, bank accounts, inventory, tools, furniture, and the like; but also, a business has intangible assets such as mortgages, leases, labor, accounts receivable, and goodwill. Valuing the goodwill of a business presents its own complexities because of the distinction between the goodwill of the enterprise versus the goodwill of the owner.

Enterprise goodwill is the capacity of a business to attract new customers or keep old ones due to great locations, reputation for superior service or skill, or anything else that influences customers to continue a professional relationship. Personal goodwill describes the nontransferable ability of an individual to attract and maintain customers due to his or her particular reputation. The goodwill of the enterprise can be considered in the valuation of the entity; whereas, the goodwill of the owner belongs to the owner himself or herself and is not a marital asset.

Another issue in valuation of a business is whether the spouse owner has control over the entity – whether he or she has to share power or decision-making authority. Thus, the value of the entity can be reduced based on a discount for lack of control over the entity.

Another discount that applies to the valuation of a business entity in a divorce is the discount for lack of marketability. In other words, the valuation isn’t being performed between a willing buyer and a willing seller and, in some cases, can’t be sold easily.

Business valuations are usually performed in Texas divorces by a CPA who is Accredited in Business Valuation, a Certified Business Appraiser, or someone recognized by the American Society of Appraisers. Regardless, the expert must be familiar with the nuances of Texas divorce laws as applied to business entities as a marital asset.

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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.