A division of property and assets case involving the valuation of a start-up company was recently decided by the Florida Court of Appeal. In a case captioned Soria v. Soria, the husband and wife were married in 1988. The parties 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 of debt. The company’s liabilities varied from $9000 to $76,000 and the company’s assets varied from $147,000 to $190,000. 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 companies, the value of a business is determined by assessing its fair market value. The fair market value of a business is the amount that a willing buyer would pay a willing seller would accept if both parties had knowledge of the value of the business and neither party was under duress. 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 Boca Raton, Florida about business related issues , contact Matthew Lane & Associates, P.A. at (561) 363-3400.