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Texas Law - How is Goodwill Counted? Goodwill arises when the business is worth more than the tangible assets. Things such as reputation, a desirable location, a unique product, and so on, can all-but-guarantee an earnings stream, and so make the business have more value than simply its tangible assets. Business goodwill accumulated during marriage is community property that may be divide on divorce. However, business value attributable solely to the worker's professional ability, which would disappear if the worker were to leave, is not a community asset. Cases: Parker (1995) 897 SW2d 918 (the court needs to distinguish between business goodwill and personal goodwill; business goodwill is goodwill that exists separate and apart from a professional's personal skills, ability, and reputation; personal goodwill is just that personal skills, ability, and reputation; in this case, the court did not discuss personal goodwill, so the appellate court assumed that the trial court had correctly focused on business goodwill). Smith (1992) 836 SW2d 688 (Husband's respiratory care business, in which he had one employee, and one big contract with a hospital which possibly depended on his personal relationships, depended entirely on his working there. There was no goodwill separate from that.) Guzman (1992) 827 SW2d 445 (Husband owned a solo CPA practice. Court held that the entire value was due to his personal professional ability, and none of it was business goodwill. So wife was not entitled to a share of the value of the business upon the divorce.) Finch (1992) 825 SW2d 218 (where Alternator and Starter auto repair shop had employees other than husband, it was proper for court to find that business goodwill existed; this business goodwill could have been divided upon the divorce.)
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