Can a nonprofessional business have personal goodwill? Arkansas court explains

Atherton v. Atherton, 2018 Ark. App. LEXIS 264 (April 11, 2018)

Arkansas is one of the many states that differentiate between enterprise goodwill and personal goodwill. The former is marital property and divisible at divorce; the latter is not. But, a few years ago, the owner of a nonprofessional business, a restaurant, argued somewhat successfully that his business had goodwill whose value was solely attributable to him. The different courts ruling on that case disagreed among themselves on the issue of whether a nonprofessional business can have personal goodwill. The rulings created some confusion as to the state of the law. 

The same issue arose again in a recent divorce case and prompted the appeals court to clarify the courts’ position.

In the instant case, the husband was the sole owner of a business that sold motors to operate gates. At trial, he claimed both that the business was not profitable and, in the alternative, that whatever value there was in the business was goodwill attributable to the husband. The trial court rejected both arguments. Concerning personal goodwill, the court said the claim that there was personal goodwill in a nonprofessional corporation “has been soundly rejected by the appellate courts of the State of Arkansas.” 

The husband appealed the ruling, citing the 2013 Brave v. Brave decision by the state Court of Appeals as support for his position. 

However, the Court of Appeals found the Brave case did not help the husband’s case. 

To find out more about the court’s reasoning, click here.

To access BVR’s goodwill jurisprudence chart, click here.