Equitable Distribution & Business Goodwill Vs. Personal Goodwill

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Our Pittsburgh Family Law firm brings you this information on “Goodwill” in equitable distribution:

Equitable distribution, or the dividing of marital assets and debts between spouses as part of a divorce, is typically thought of as the division of “tangible” assets- meaning the marital residence, cars, boats, cash, jewelry, furniture, and the like. However, a less-commonly discussed issue in Pennsylvania Family Law involves a business or professional interest of one spouse and determining what parts of that business are subject to equitable distribution.

Do you ever go out of your way to a particular dentist’s office, a private retail store, or “your mechanic,” simply because you LIKE the way that place conducts business? Whether it is the friendly way the dentist treats you during your visits, the particular assistance you receive from the owner of a dress shop when buying clothes, or the beyond-typical knowledge of your particular make and model of automobile, there is some reason why you continue to return to these businesses. Sometimes, the reasons why you prefer certain businesses over others are hard to express in words. Legally speaking, this is called “Personal Goodwill.”

Pennsylvania Courts make distinctions between personal goodwill and business goodwill for equitable distribution purposes. Business goodwill, or that which is connected to a person’s business, is sometimes considered marital property and divisible during equitable distribution. “Goodwill” means the intangible assets beyond the hard assets of the business. If the “intangible assets of the business” are assets that would transfer to a new owner if the business were sold, then this business or “enterprise” goodwill is divisible marital property because this is considered an asset of the business. This can include having a business in a good location, and a familiar and well-regarded generic name.

On the other hand, Personal Goodwill is not divisible as martial property upon divorce. With personal goodwill, the reputation of a person in their professional capacity is considered personal to the spouse and is not considered marital property. To this end, a spouse with a professional degree as part of their “personal goodwill” will not have to worry about this degree being “divided” for equitable distribution purposes.