What is the treatment of goodwill for a commercial business in divorce?

The treatment of goodwill for a commercial business in a divorce is understood through the lens of whether the business itself is classified as marital property. If a business is determined to be marital property, the goodwill associated with that business is also deemed marital property. This is based on the principle that goodwill, which reflects the ability of a business to generate income beyond its tangible assets, represents value that is relevant to both parties during property division.

Goodwill can encompass factors such as the reputation of the business, customer relationships, and the overall brand value, which can all contribute to the earnings of the business aside from its physical assets. In situations where the business is classified as marital property—meaning it was acquired during the marriage and is thus subject to equitable division—goodwill is included as part of the overall valuation of that business. Therefore, each spouse is entitled to a share of that goodwill when the business is evaluated for property distribution.

Other options suggest misunderstandings about marital property classification. For instance, treating goodwill as always separate property or not recognizing its value in divorce settlements overlooks its significance in the valuation of businesses. Only recognizing tangible assets would ignore the comprehensive nature of business valuations in divorce cases, where intangible assets like goodwill play a crucial role.