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Business Valuation of Goodwill and a Book of Business

On Behalf of | Feb 26, 2021 | Professional Practice & Business Ownership

How will the Family Court look at the business valuation of Goodwill and a Book of Business in a San Diego divorce?  What is Goodwill and what is considered to be a Book of Business?  Should the value of Goodwill and/or Book of Business be considered as part of business valuation in a San Diego divorce?

The business valuation of goodwill and a book of business is a crucial part of determining the community interest in the business or professional practice of either or both of the parties.  Goodwill is generally associated with sole proprietorships, privately held companies and professional practices which rely upon the unique skill, knowledge, experience and expertise of the business owner.

Goodwill is considered to be the intangible value the owner or principal contributes to the delivery of the products and/or services of the company.  Like intellectual property, Goodwill is an asset and which establishes the value of the principal as it relates to the likelihood of a patient or customer to continue to do business with the company in the future.

One of the most important questions to consider is whether the Goodwill is associated with the entity or the individual.

A Book of Business is associated with the list of customers, patients or clients of a licensed professional and in some cases a salesperson.  Would another business, practice or professional pay for that group of customers, patients or clients?  If so, what is the process to establish the value of that book of business in the context of a divorce?

The business valuation of goodwill and a book of business in a Carlsbad divorce requires specific expertise.  In some cases an independent appraisal expert will be agreed upon and engaged by the former spouses, while in other cases each former spouse provides their own expert appraiser.

The community property interest in the business or professional practice must be equally divided between the former spouses.  If the business owner or professional wishes to continue with their business they must pay half of the total marital interest established in the valuation to their former spouse.  These cases are often quite contentious as there can be significant sums of money at stake.

If either you, your former spouse or both of you have an interest in a privately held company, sole proprietorship or professional practice you will need the experienced, proven counsel and advice of the Certified Family Law Specialists at Burke & Domercq.

Protect your own interests and contact us or call 760-389-3927 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.