The Lawletter Vol 41 No 9
The South Carolina Supreme Court recently considered a case that provides a wealth of guidance on business valuation questions. Moore v. Moore, 414 S.C. 490, 779 S.E.2d 533 (2015).
The issue was one that arises often in divorce cases—is the goodwill of a business part of the business's value for purposes of a divorce case? Adopting the majority rule nationwide, the court held that the enterprise goodwill of the business is included, but that the individual goodwill of the owner is not included. Stated differently, the value includes goodwill that is transferable to another owner, but it does not include goodwill that is not transferable and resides in the owner individually.
The practical question, which has arisen in dozens of cases nationwide, is how to distinguish between the two types of goodwill. The court recognized, as most other courts have done, that goodwill need not be entirely enterprise or entirely individual. Businesses get their customers from many sources, and it is quite possible that some of those sources are individual to the owner, while others are transferable with the enterprise. For example, a dental practice might draw half of its customers from the individual reputation of the dentists, but the other half from the convenient location of its office building.Read More