Key Takeaways

• Personal goodwill is often excluded from marital assets, while enterprise goodwill is usually divisible.
• Valuation methods like MUM and with/without isolate personal vs. enterprise value accurately.
• Minnesota, California, and Florida treat goodwill differently—state-specific expertise is critical.
• Correctly identifying goodwill can dramatically impact divorce settlements and protect client interests

Divorce involving a closely held business isn’t just about dividing assets—it’s about getting the value right. One key factor that often gets overlooked? Goodwill. Not the kind you feel, but the kind that can significantly impact how your business is valued and divided during a divorce.

At BGH Valuation, we’ve seen firsthand how misunderstanding goodwill can inflate or deflate a business’s value—and ultimately, affect everything from settlement amounts to post-divorce finances. In this article, we break down personal vs. enterprise goodwill, explain why it matters, and show you how courts in Minnesota, California, and Florida handle it differently.

What Exactly Is Goodwill in a Business?

Goodwill represents the intangible value of your business beyond its tangible assets like equipment, inventory, or real estate. It’s the reputation, customer loyalty, brand recognition, and operational strength that keep profits coming in.

But here’s the catch: not all goodwill is created equal.

• Enterprise Goodwill: This is tied to the business itself—its systems, staff, customer lists, or location. It’s transferable and often considered marital property in divorce cases because it would remain valuable even if ownership changes.
• Personal Goodwill: This depends on the business owner’s personal relationships, expertise, or reputation. If the owner left, much of this value would disappear. In many states, personal goodwill is considered non-marital because it isn’t easily transferable.

Why does this distinction matter? Because including personal goodwill as a marital asset could artificially inflate the business value, leading to unfair settlements. Courts want to isolate what’s truly divisible.

How We Quantify Goodwill in Divorce Valuations

Valuing goodwill isn’t guesswork—it requires methods that stand up to scrutiny from attorneys, opposing experts, and judges. At BGH Valuation, we follow NACVA and USPAP standards to ensure accuracy and defensibility.

Two primary methods we use:

1. Multi-Attribute Utility Model (MUM)

MUM scores factors like reputation, location, systems, and owner dependency to allocate goodwill between personal and enterprise categories. It’s especially effective for owner-centric businesses where the founder’s reputation drives most of the revenue.

2. With/Without Method

This approach compares the business’s financial performance with the owner’s direct involvement versus without it. We project future earnings assuming the owner leaves or is replaced—isolating personal goodwill based on the revenue loss tied to their absence.

Both methods create clear, court-ready valuations that withstand cross-examination.

Real-World Examples from Recent BGH Valuation Cases

Case 1: Minnesota Education Company

A nursing education business was built entirely around the owner’s reputation and expertise. Using the MUM model, we found that roughly 50% of the business’s value was personal goodwill. Under Minnesota law, only the enterprise portion was considered marital property, shielding the owner from unfair asset division.

Case 2: Minnesota Dental Practice

Using the with/without method, we valued a dental practice as follows:

• With Owner: $4.28M
• Without Owner: $1.05M

The $3.23M difference represented personal goodwill—which Minnesota law excludes from marital property—resulting in a far smaller divisible value and a fairer outcome for the owner.

These examples show why using the right valuation approach can have a dramatic impact on divorce settlements.

How States Treat Goodwill Differently

Divorce laws vary widely by state, which makes state-specific valuation expertise critical.

Minnesota

• Equitable distribution state.
• Personal goodwill is excluded from marital assets under cases like Rogers v. Rogers (1980) and Nardini v. Nardini (1987).
• Enterprise goodwill is divisible only if it’s independent of the owner’s personal efforts.

California

• Community property state.
• Enterprise goodwill is marital property (In re Marriage of Foster).
• Personal goodwill is typically separate property, especially in professional practices.

Florida

• Equitable distribution state, but unlike MN and CA, personal goodwill is often included if tied to marital efforts (Thompson v. Thompson, 1991).
• This can significantly increase the divisible value in Florida cases.
• Understanding these nuances ensures valuations comply with state law and lead to equitable settlements.

Why Choose BGH Valuation for Divorce Business Valuations

Divorce cases require valuations that are accurate, defensible, and state-specific. At BGH Valuation, we bring:

• Certified Valuation Expertise: NACVA-credentialed professionals with decades of experience.
• Court-Tested Methods: MUM, with/without, and other approaches tailored to each case.
• State-Specific Knowledge: Minnesota, California, Florida, and beyond.
• Attorney Collaboration: We work seamlessly with family law attorneys to provide reports judges trust.

When a client’s financial future depends on getting it right, we deliver valuations that stand up in court.

Wrapping Up: Protect Your Interests in Divorce

Personal vs. enterprise goodwill isn’t just a technical issue—it can change the financial outcome of a divorce settlement by millions of dollars. Whether you’re a business owner, attorney, or financial advisor, understanding this distinction is critical.

At BGH Valuation, we’ve helped countless clients protect their interests with clear, defensible, and fair business valuations.

FAQs

What is the difference between personal and enterprise goodwill?

Personal goodwill depends on the owner’s personal reputation or skills, while enterprise goodwill belongs to the business itself and is transferable.

Why do courts exclude personal goodwill in some states?

Because it represents future earning capacity tied to one individual, not a marital asset that can be sold or transferred.

How can I get a valuation for my business during divorce?

Contact a certified business valuator like BGH Valuation for a confidential consultation to ensure your valuation is accurate and defensible.