In a Florida divorce, the value of a business is determined by valuing all of its assets and the amount of its liabilities. In Florida, businesses are valued according to their fair market value. Fair market value is the amount that a willing buyer would pay and a willing seller would accept. Enterprise value is the value of a businesses’ tangible assets and the willingness of customers to return (business goodwill). Personal goodwill is based upon the skill and the continued participation of the current owner in the business.
In a Florida Court of Appeal case captioned Soria v. Soria, the husband and wife were married in April 1988. The husband was the founder of a start-up limited liability company. At the time of trial, the company was carrying approximately $400,000.00 of debt. The company’s liabilities varied from $9,000.00 to $76,000.00 and the company’s assets varied from $147,000.00 to $190,000.00. The husband testified that he was essential to the operation of the business and that the business could not operate without him. The husband owned approximately 64% of the business and investors owned the remaining 36% of the business. After the divorce was filed, the husband transferred 30,000 of his shares in the company to his girlfriend in order to compensate her for her work for the company.
The par value of the company stock was a dollar per share. The trial court used the par value of the company’s stock to value the company. The Florida Court of Appeal reversed the trial court. The Florida Court of Appeal held that in making a division of property and assets determination involving a business, the value of the business is determined by assessing its fair market value. The Florida Court of Appeal stated that the fair market value of the business in question was the amount of money that a willing buyer would pay for the business and a willing seller would accept for the business when both parties have knowledge of the value of the business and neither is under duress to enter into the transaction. The value of a business is the value of the company’s assets plus the value of its goodwill. Enterprise goodwill is the value of a business that exceeds its assets. It constitutes the tendency of patrons to return to a business irrespective of the presence of its owner. Professional goodwill of a doctor, lawyer or business owner is distinct from enterprise goodwill. It is based on the skill and continued participation of the owner in a business. Although, enterprise goodwill is considered to be a marital asset in divorce proceedings, a doctor, lawyer or business owner’s personal or professional goodwill is not considered to be a marital asset.
To speak with a divorce attorney in West Palm Beach, Florida about business related issues, contact the Lane Law Firm, P.A.