Personal v. Enterprise Goodwill

When a business is part of a divorce

You have worked tirelessly to build your business over the years. You have worked hard to retain your clients and keep them coming back year after year. You have set your business apart from other businesses in your industry by building business relationships with your customers. Now, your spouse is seeking divorce and wants half of your business.

When determining the value of the business, a business valuation expert will value the assets, liabilities, and possibly the “goodwill” of the business. What is goodwill? The Florida Supreme Court defines goodwill as the intangible asset of a business that keeps your clients or customers coming back or the reputation of the business.

Personal goodwill versus enterprise goodwill

A key factor in determining how much of the business’ value your spouse is entitled to, is whether the goodwill is “personal” goodwill or “enterprise” goodwill. Can the business go on and thrive without you or do the customers return just for you? Would the sale of your business include a non-compete or non-solicitation agreement? If it does, this may be an indication personal goodwill exists. Because personal goodwill is not a marital asset, it will not be subject to equitable distribution during the divorce. However, if the reputation of your business is independent of your presence, it is likely that enterprise goodwill exists. Enterprise goodwill is a marital asset and is subject to equitable distribution.

When determining the value of the business, a business valuation expert will value the assets and liabilities of the business and whether the goodwill of the business is personal or enterprise goodwill.

At Birnbaum, Lippman & Gregoire, PLLC, we work with respected business valuation professionals in Palm Beach, Broward, Miami-Dade, and Collier Counties.