Austin, TX family law attorney Bill Powers explains how closely held and family businesses are divided in a Texas divorce. He explains that a closely held business is typically divided by determining who is the primary person engaged in that business. For example, if it’s an engineering firm, the engineer is most likely the party awarded that asset. The next challenge is establishing the value of the business.

In Texas, closely held businesses are valued by separating enterprise goodwill—how many clients come to the business itself—from personal goodwill—how many clients come because of the individual, such as the engineer. These factors significantly affect the overall valuation.

Once the valuation is complete, a methodology must be established to equalize the division of the marital estate. He gives an example of a case where the business was worth around eight million dollars, but there wasn’t four million in liquid assets to award the spouse immediately. In that scenario, they had to create a mechanism for paying her over time, which is a common approach in closely held business cases.