Evaluating Business Goodwill in Divorce Negotiations

There are a number of factors that can complicate and slow down a divorce. One of these factors is when one or both spouses own a business. Do you or your soon-to-be-ex own a business? Then you will want to keep on reading!

It is imperative to conduct thorough business valuations before negotiating what is going to happen to the family business. Goodwill is an intangible asset that is important to consider in valuing a business. Goodwill can be broadly defined as "an asset that arises from the name, reputation, customer loyalty, location, products, etc.”1

There are two types of goodwill to consider in a business. Enterprise goodwill is carried with the business and is attached to the business. Personal/professional goodwill is attached to the owner of the business and cannot be transferred when a business is sold. This type of goodwill is concerned with the reputation of the business owner, and how this affects patronage.

Even though goodwill is an intangible asset, any business owner knows how important it is for a successful and thriving business. When working with your attorney and business appraiser, you should speak with your team about business goodwill and how that will be evaluated by the appraiser.

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Source: https://familylawyermagazine.com/articles/defining-determining-business-goodwill-in-divorce-settlements/