Asset vs. income approach for valuing goodwill in Tennessee

BVWireIssue #228-1
September 1, 2021

marital dissolution/divorce
goodwill, enterprise goodwill, income approach, personal goodwill, asset approach, marital asset, alimony

In Tennessee, personal goodwill is not a marital asset that can be divided between the divorcing parties. In a recent case, the wife owned a speech clinic operated as a sole member LLC. The wife’s expert valued the firm at $82,000 using the asset approach, reasoning that all goodwill was personal. The husband’s expert used the income approach and came up with a value of $790,000. The trial court sided with the husband’s expert but reduced the value by 14.3%, which was the percentage of revenue attributable to the wife. The husband appealed, raising several issues, but the state’s appellate court upheld the trial court’s decision. The case is Cela v. Cela, 2021 Tenn. App. LEXIS 304, 2021 WL 3240238 (July 30, 2021), and a case digest analysis and the full opinion are available on the BVLaw platform.
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