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Personal Goodwill vs. Commercial Goodwill in a Divorce

Personal Goodwill vs. Commercial Goodwill in a Divorce
Hendershot, Cannon & Hisey, P.C.

Goodwill is a valuable asset. As with other assets, such as homes and cars, goodwill is part of what a person "owns," even though it is generally intangible. Nonetheless, certain goodwill can be valued and divided in a divorce, or otherwise accounted for in the context of a divorce settlement. There are two types of goodwill: personal and commercial. If you're a business owner or a physician who owns a medical practice - then knowing what goodwill can or cannot be divided is essential.

Personal Goodwill

At Hendershot, Cannon & Hisey, P.C., many of our clients are professionals (or the husbands and wives of professionals). Accountants, engineers, lawyers, doctors, and other professionals are often shareholders, partners, or sole owners in their businesses. Over years in practice, many professionals build up a measure of personal goodwill, which helps contribute to the success of their practices.

In a physician's case, personal goodwill could be the value of referrals from other doctors that come by way of the physician's reputation. These referrals aren't generated because of a contract, but because of the physician's standing in the medical community.

  • In a divorce, personal goodwill cannot be divided, although you can account for personal goodwill in the broader context of negotiating a divorce settlement.

Commercial Goodwill

A professional who has a measure of personal goodwill based on his or her reputation, skills and experience, will also have a separate measure of commercial goodwill based on the value of contracts and other business assets.

To take the example of a physician's income from patient referrals generated because of a contract (as opposed to referrals generated because of reputation): A surgeon who negotiates a cell coverage agreement to be on call for $1,000 per day for X number of days on a one-year contract is an example of commercial goodwill.

  • Unlike personal goodwill, commercial goodwill can be divided in a divorce.

Learn More About Dividing Assets and Liabilities in a Divorce

Dividing assets - such as commercial and personal goodwill - can become one of the most contentious points in a divorce, especially for professionals and business owners.To learn more about this subject, see our page on representing clients in complex divorce cases. We write about a wide variety of scenarios, one of which may fit your situation. To speak with the lawyers of Hendershot, Cannon & Hisey, P.C., call (713) 909-7323