Those who own professional practices often have a difficult time during a divorce determining a fair market value of their business. When considering the valuation of professional practices, especially smaller practices, whether dental, legal, medical, accounting, psychiatric, or other, much of the “value” of the business is in the form of personal goodwill. How does this get taken into count in a South Carolina divorce? Keep reading to find out.
What is personal goodwill?
Personal goodwill is something that exists in a business when the company is said to have a value greater than the total of its income and assets. In other words, it's an intangible worth that cannot be easily seen or measured. This advantage is usually the result of a local position of trust, often related to a person's skill or reputation. Personal goodwill is also seen as something in the context of a small business that attaches to the professional practitioner, meaning the personal goodwill value of a small-town dentist attaches to the dentist himself. In fact, if the dentist were to die, the value of the personal goodwill may cease to exist.
Can goodwill be included for equitable division purposes?
The short answer is no. Though some lower courts have agreed that goodwill, or at least a version of goodwill known as “enterprise goodwill” can be factored into the division of assets, the South Carolina Supreme Court has refused to allow personal goodwill to be defined as a divisible asset. According to the South Carolina Supreme Court, personal goodwill is by its very nature intangible, and as a result, not subject to equitable division.
That means in the case of a small professional practice, personal goodwill will not be included in the valuation process. The only factors that matter are the income and tangible assets of the business, which can included “enterprise goodwill,” things that can be taken into account for child support, alimony, and equitable division purposes. It is for these reasons that you should ensure that you have an experienced family law attorney protecting your interests if you are facing a separation or divorce.
Our firm's Senior Partner, Ben Stevens, is a Fellow in both the American Academy of Matrimonial Lawyers (1 of 32 statewide) and the International Academy of Matrimonial Lawyers (1 of only 6 in South Carolina). As such, he is well versed in handling cases involving professionals and business owners. You are welcome to contact our office at (864) 598-9172 or by clicking here to request a consultation with Mr. Stevens.