Small Business Owners

The appreciation of a small business during a marriage can be marital. If the appreciation of the business or growth in value of the business during the marriage is found to be marital the non-owner spouse is frequently entitled to one half of said growth. It’s rare that the business would be transferred from one spouse to another in a divorce if the second spouse is not a part owner however it is very common for that spouse to receive a buyout. Therefore it is oftentimes necessary to hire a business evaluator to determine the value of a business at the time of the marriage and the value of the business at the time of the divorce. So that the difference may be calculated. However, if the business was created during the marriage then it may be necessary to value the entire business. There are several key distinctions in determining the value of a business such as personal goodwill versus entrepreneurial goodwill. Personal goodwill is the value a company has attributable to the person running the business. This type of goodwill is not marital and any value that it adds to the company is not to be divided in a divorce. Goodwill is a value bestowed upon a company or given to a company above the net worth of the assets less the liabilities. (Get the specific wording from Thompson). Many small businesses have a value based solely on personal goodwill. For example if no one would buy your company without a noncompete contract it’s likely that most of the value of your company is through personal goodwill and therefore the value of the company is not a marital asset. This issue can be very complex and you shouldn’t try to negotiate it alone. You need an experienced attorney who could handle this issue.