Is Your Goodwill in a Business Community Property for Divorce?

Division of community property is almost always a key issue in a Woodlands divorce case. Some assets are easier to identify and divide than others. For example, identifying and dividing the community property portion of a simple checking account or life insurance policy is normally not very difficult. Other assets can be a lot more complicated to identify and divide.

One type of asset we recently discussed was the formula for dividing restricted stock owned by one spouse. Another asset that can be very difficult to identify and divide is the goodwill of a business that either spouse is a member of. This is a common issue in partnership and closely held companies used by accountants, attorneys, doctors, and other professionals.

Goodwill that exists separate and apart from a professional’s personal skills, ability, and reputation is divisible property in a Woodlands divorce. To determine whether goodwill that is subject to division during divorce exists in a professional practice your Woodlands Divorce Attorney must complete two steps:

1. First, goodwill must be determined to exist independently of the personal ability of the professional spouse; and
2. Second, if such goodwill is found to exist, the court must determine whether that goodwill has a commercial value in which the community estate is entitled to share.

Confirming the existence of goodwill that is community property is only the beginning for your Woodlands Divorce attorney in dividing a spouse’s interest in a business. After you know there is goodwill to divide, the next hurdle becomes figuring out the value of that goodwill. We will take a closer look at some of the valuation issues in a future article.

If you or your spouse own part of a business that has or may have goodwill that is community property then do not forget to include that element in your final division of property. If it is not divided as part of the divorce decree it may remain subject to division in the future.

The flexibility to handle complex issues like the goodwill of a partnership or closely held business is one advantage of choosing a Collaborative Divorce process for your Woodlands Divorce case. In a Collaborative Divorce both of you keep control over how to resolve the issue. If you go the litigation route and leave it up to a judge or mediator you are giving them control and who knows what they are going to tell you to do.