Business Valuation in Miami Divorce Cases

How Florida Classifies a Business in Divorce

Florida is an equitable distribution state, meaning marital assets and liabilities are divided fairly between spouses rather than split automatically in half. Under Florida Statute Section 61.075, a business formed or acquired during the marriage is generally presumed to be a marital asset, regardless of which spouse’s name appears on ownership records.

A business one spouse owned before the marriage can still become partially marital property. If marital funds, time, or effort contributed to its growth during the marriage, courts may treat the appreciated portion as marital. Establishing what portion is non-marital requires tracing, which means producing documentation to distinguish pre-marital contributions from marital ones. Courts value marital property, including a business interest, as of a valuation date the court determines.

Valuation Approaches and Florida’s Fair Market Value Standard

Florida courts and valuation professionals apply three main methodologies when valuing a business in a divorce proceeding.

• Income approach: Projects the business’s expected future earnings and discounts them to a present value. This method is common for businesses with consistent cash flow, such as professional practices or service companies.
• Market approach: Values the business by comparing it to sales of similar companies in the same industry and market.
• Asset-based approach: Values the business by calculating total assets minus liabilities, sometimes called the cost approach.

Effective July 1, 2024, Florida Statute Section 61.075(6)(a)1.f. established fair market value as the standard courts use to value a marital interest in a closely held business. Fair market value is the price a willing and able buyer and seller would agree upon without either being compelled to act. This codified standard gives both parties and their valuation professionals clearer direction during litigation.

Enterprise Goodwill vs. Personal Goodwill

One of the most contested issues in business valuation during a Florida divorce is how goodwill gets classified. Florida law draws a clear line between two categories.

Enterprise goodwill is value that belongs to the business itself, independent of any individual owner. It includes the company’s brand recognition, established client base, systems, and reputation as a going concern. Enterprise goodwill is a marital asset subject to equitable distribution.

Personal goodwill is value tied to a specific owner’s individual reputation, skills, or professional relationships. If the owner left, this value would leave with them. Under the Florida Supreme Court’s holding in Thompson v. Thompson, personal goodwill isn’t a marital asset and can’t be divided in divorce.

Florida’s 2024 statutory update also addresses how courts and appraisers handle the separation of these two categories and account for restrictive covenants such as non-compete agreements when valuing a closely held business. How goodwill is classified and how applicable covenants are treated can significantly affect the overall valuation figure, making these issues central to any business valuation dispute in a Miami divorce.