Divorce Business Valuations

Divorce valuations present some unique issues.  The states vary on whether two items are included in the marital estate.  They are:

• Enterprise Goodwill Value
• Personal/Professional Goodwill Value.

Enterprise Goodwill Value is the goodwill value remaining after Personal/Professional Goodwill is removed.

Personal/Professional Goodwill value occurs when a key person holds the relationships with customers, vendors or clients.  The easiest way to visualize it is to imagine what would happened to the business if the key person left, did not execute a non-competition agreement, and took all the customers/clients to a new venture.

Another issue is whether or not the state is a community property state.

If the company is a corporation or LLC, normally an Equity Appraisal is required.

If the company is a Sole Proprietorship, normally an Asset Value (including goodwill, if appropriate) Appraisal is required.

Normally the objective is to determine the fair market buyout value for purposes of settlement.  Occasionally, when a settlement cannot be reached, the judge will order a sale, at which time an appraisal may be required.