The Florida Supreme Court ruled in 1991 that if a husband’s law practice had monetary value over and above the value of its tangible assets, separate and distinct from the reputation of the husband, then the practice had “good will,” and the good will that accumulated during the marriage was a marital asset subject to equitable distribution. The determination of existence and value of the good will of one spouse’s professional practice is a question of fact that should be made on a case-by-case basis in dissolution of marriage proceedings with the assistance of expert testimony. The exclusive method of measuring good will of a professional services association is to determine the fair market value of the practice, or what a willing seller would accept from a willing buyer for sale of the business, with neither acting under duress, and, then, reduce the fair market value by the value of the assets.
Subsequent Florida district court of appeal rulings extended these concepts to all professional practices, including doctors’, and elaborated on the definition of good will by distinguishing between the professional spouse’s personal good will and the practice’s enterprise good will. Personal good will is representative of a person’s probable future earning capacity and is not a marital asset. Enterprise good will, which has been defined as “nothing more than the probability that the old customers will resort to the old place,” is a marital asset.
In dissolution of marriage cases in Florida, the professional practices of doctors, lawyers, engineers, accountants and others are commonly valued by valuation experts. More often than not, the professional/owner spouse ends up buying out the other spouse’s one half share of the marital component of the practice. This can be accomplished by a lump sum payout, monthly payments or an exchange of assets or liabilities.
Although this article has focused on professional practices, these same concepts apply to a wide array non-professional businesses. If you need assistance regarding your divorce or the distribution of your practice or business, please feel free to e-mail me at paulrice@riceroselaw.com or contact my office at 386-257-1222. I represent physicians, professionals and business owners in divorce cases and work with business valuation experts to obtain the best possible results for my clients.
