Business owners, owners of professional practices, or individuals with a significant accumulation of assets are those that a PA family law attorney would deem “high income divorce” matters. These cases are often more complex because they involve numerous businesses, properties, and complex assets. This is when it is important to obtain the legal advice of an attorney who is well-versed in family law, as you want to ensure that as a business owner or a high income individual, your assets are protected throughout the divorce process.
What issues arise with high-income individuals in PA?
One of the major issues in these divorces is determining a valuation for a business or practice. In equitable distribution, each asset must be assessed with a value so that the parties may consider this value in the equitable distribution process. When it comes to business interests in a Pennsylvania divorce, the “book value” of the business must be determined. This is determined often through the use of a business valuation expert which is retained for the purpose of determining the worth of the business at issue.
Another aspect of a business to consider for equitable distribution purposes is the “business goodwill” – or the reputation of a business. Things such as an advantageous location, the capital structure of the business, or the business’ relationship with their customers and other individuals that they may do business with will contribute to a positive business goodwill. For purposes of equitable distribution in Pennsylvania, a court must consider if the business goodwill, which is intangible, can be transferred to a third person who may be purchasing that business. Pennsylvania courts also distinguish between “personal goodwill” and “enterprise goodwill.” For example, if the goodwill of a professional practice for a doctor, dentist, optometrist, veterinarian, or chiropractor is due to the skill and reputation of the professional, this is considered personal goodwill and is generally not transferable to a third party. Enterprise goodwill, on the other hand, is transferrable to a third party, as this is not attributed solely to the individual. However, for professional practices, goodwill that is attributable to business location and customer lists (even for a sole practitioner) is not personal goodwill and may be assigned a specific value for equitable distribution.
Aside from a business valuation, individuals with high incomes may also need thorough property valuations performed for both business property and personal property through appraisals or other methods.
If you are a high income individual or own your own business, contact our experienced PA divorce attorneys today. We will ensure that your business assets are protected in the best way possible!