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How can you arrive at a valuation for your family business?

On Behalf of | Mar 13, 2020 | Family Law

If you have a family business here in San Antonio and you’re preparing to get divorced, then you may wonder how it is that you’re going to come up with a value for it so that you can appropriately split it up. Coming up with a business valuation isn’t necessarily a straightforward process. There are three different approaches that you can use to get answers though.

One option that you may want to go with is the income-based one. A forensic accountant or some other type of financial expert will generally take a look at your company’s records to see what your cash flow and profits have historically been like. They’ll use that same information to project what those same indexes will be in the future. This will allow the accountant to better assign a monetary value to your business.

Another approach to coming up with a valuation for your business is the market-based one. A forensic accountant may take your business and compare it to similar ones that have recently sold as part of this approach. Fair market value is the price that your accountant believes that other buyers might be willing to buy your business for.

The third approach for assigning a value to a family business is to use the asset-based method. A forensic accountant looks at both your company’s liabilities and assets as part of this process. They determine your businesses’ worth by deducting its liabilities from its assets. Whatever amount is left after that is what is listed as its valuation.

There are many options for handling a family business when you get divorced. You may decide to continue running it jointly with your ex or buy out or sell off your interest in it. You both may also decide to let it go and split the proceeds. A family law attorney can help you decide how to handle the division of an asset such as this in your Texas divorce case.