Personal goodwill may not be a marital asset absent a non-compete

BVWireIssue #106-2
July 20, 2011

William Holmer (First Princeton Corp.) joined NACVA members last week in BVR’s conference room to discuss Slater v. Slater, 2010 WL 5356556 (Or. App.)(Dec. 29, 2010).  Holmer was the expert for the husband, who owned a chiropractic practice.

 “Using Slater as an example, Holmer made it clear that it is important to distinguish between valuing the shares of the company versus valuing the company itself,” says Stuart Weiss, CPA/ABV, CVA and president of NACVA’s Oregon chapter. That perspective was important because anyone looking at buying shares in the chiropractor’s practice would be concerned about the lack of a non-compete agreement as well as the lack of an employment contract tying the doctor to the practice. In Slater, Homer concluded that most of the goodwill was personal and not enterprise. “To consider goodwill a part of the business, the wife assumed that Dr. Slater would eventually sign a covenant not to compete if the business were put up for sale, a fact not in evidence,” Holmer told the group.  The court agreed with Holmer and concluded that any enterprise goodwill was minimal. Slater v. Slater is available at BVLaw.

Now, go educate the attorneys. During last week’s BVR webinar Goodwill in Divorce, presenter James Alerding (Clifton Gunderson) said “most states are firmly entrenched in the division of personal and enterprise goodwill.”  But don’t expect attorneys to know anything about it, co-presenter Andrew Soshnick (Baker Daniels) added. Alerding provided a list of common and not-so-common factors that analysts should consider when determining personal versus enterprise goodwill in divorce cases. Download Examples of Factors Implementing Personal Goodwill in Cases on the BVR Free Resources page.

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