A court must follow the case law when determining the valuation of a business in the Orlando, Florida area. That starts with examining personal goodwill and equitable distribution.
Personal Goodwill and Equitable Distribution
When making an equitable distribution, the trial court should exclude from its valuation of a business the amount of a party’s personal goodwill. Personal goodwill represents a person’s probable future earnings capacity and should not be included in the value of a professional practice for purposes of equitable distribution. At trial, a party must present expert testimony to establish goodwill. The evidence should show recent actual sales of a similarly situated practice in the relevant market.
Expert Testimony and Business Valuation
The party will proffer expert testimony regarding a method of computation of the valuation of the business. Each party may obtain their own expert to value the business.
There are alternate methods of valuation available for the expert to use to calculate the value of the business. If neither party offers expert testimony regarding a method of computation, the trial court is within its discretion to adopt a valuation that is supported by competent substantial evidence.
Primary Business Valuation Methods
There are three primary methods to value a business. An expert witness will most likely use one of these methods to value your business. The expert should discuss with you and your attorney which method they will utilize and why. One is income-based, focusing on future earnings. The other two, fair market value and capitalization of earnings, are most commonly used to determine a business’s valuation. Here is how each of them work:
Fair Market Value Approach
One approach is the Fair Market Value Approach. In this approach, the expert determines the fair market value of the assets minus the fair market value of the debts.
Capitalization of Earnings Approach
Another approach is the capitalization of earnings approach. Your expert will determine the following:
- A number and value of what your business is worth
- What part of the business is marital
- What part of the business is nonmarital
If you have more questions regarding a Marital and Family Law matter, you may call Ann Marie Giordano Gilden at Ann Marie Giordano Gilden, P.A. at 407-732-7620 and arrange an initial consultation. You may also visit my website at: https://www.annmariegildenlaw.com
This article is for informational purposes only and does not form an attorney client privilege.