In some states, personal goodwill in a business is not part of the marital estate—but you have to have evidence that it exists. In a Utah divorce case, the wife had a veterinary pharmaceutical business with a number of employees. In its decision, the court noted that Utah case law generally associates personal goodwill with “sole proprietorships essentially run by one person” and that the wife’s business was not comparable to a sole proprietorship. The court also noted that the wife did not provide any evidence that her involvement in the business “is essential for that business to continue, given the number of employees and the extent of the operations that it has.” The wife presented a valuation rebuttal witness, whose testimony was excluded for procedural reasons. But the court noted that, even if it had not excluded the rebuttal expert, “his testimony was unpersuasive.” The wife appealed the decision, but the appellate court upheld it.
There are other issues in the case, including the wife’s “intentional scheme” to dissipate assets and devalue the marital estate and that the imposed sanctions against her were greater than the injury her misconduct caused.
The case is Erickson v. Erickson, 2022 UT App 27; 2022 Utah App. LEXIS 27; 2022 WL 619796, and a case analysis and full opinion are available on the BVLaw platform.
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