On October 7, 2015, the South Carolina Supreme Court made a major change in the way businesses are valued and divided during Family Court Law litigation. In the case of Moore v. Moore, the Supreme Court recognized the issue and growing trend of “enterprise goodwill” in a business valuation.
Before this acknowledgment, the South Carolina Supreme Court only recognized “personal goodwill” which is, “…associated with individuals. It is that part of increased earning capacity that results from the reputation, knowledge and skills of individual people. The implied assumption is that if the individual were not there, the clients would go elsewhere.”
Since personal goodwill is normally associated with professional practices, it was recognized that it is not subject to division in family law litigation. Consequently, they discovered that “enterprise goodwill” is another kind of goodwill that is subject to division in divorce.
Additionally, the court presented the Family Courts with very clear direction in order to differentiate between the two uses of goodwill. Therefore, families in South Carolina involved in the divorce process will need litigation experts to separate the “personal” from the “enterprise” goodwill. This can be a very expensive process.
Also, the spouse of the individual who started a business during their marriage will not be prevented from sharing that value of the business. This in turn could affect the award of alimony which he or she may be owed since more assets are now available.
Ultimately, the Moore v. Moore case is a very significant event that caused a big change in our law. With that, any person who is considering divorcing or currently going through a divorce, who owns a business, should keep this amendment regarding the way businesses are valued in mind.