Nothing personal about goodwill in dental practice

BVWireIssue #235-4
April 27, 2022

marital dissolution/divorce
goodwill, dental practice valuation, marital asset, marital estate, noncompete agreement, equitable distribution, marital property, alimony, retiring, sales contract, enterprise, covenant

In a South Carolina divorce case, the appellate court reversed the family court on the issue of personal versus enterprise goodwill. In this state, enterprise goodwill is marital property subject to equitable division, but personal goodwill is not (see BVR’s Charting Goodwill map).

Retiring dentist: In this case, the husband, who was 72 years old, was retiring from dentistry altogether and sold his practice to his son for $569,000 plus $51,113 of accounts receivable. The sale was done after the couple had separated but prior to the equitable division of the marital estate. The sales contract designated $424,140 as goodwill and also included a covenant not to compete. The son changed the name of the practice. The family court included all goodwill related to the value of the husband’s dental practice as personal goodwill and not part of the marital estate.

The appellate court disagreed, noting that, since the practice was not an “ongoing concern,” the goodwill was enterprise, not personal, and thus should be included as marital property. The court also noted that the husband had previously sold a second practice of his in another location at similar terms (and also including goodwill and a noncompete) and the remaining payments to the husband were treated as marital property.

Dissenting opinion: There was a dissenting opinion, which pointed out that goodwill in professional dental practices such as the one in this case “has always been classified as personal, non-marital property”—and the prior decisions did not hinge on whether the business was still an ongoing concern at the time of trial.

The case is Bostick v. Bostick, 2022 S.C. App. LEXIS 33, and a case analysis and full opinion will be available shortly on the BVLaw platform.

Please let us know if you have any comments about this article or enhancements you would like to see.