Case Comment: The Nature of Goodwill

The Supreme Court of Arkansas contributes to the debate regarding the nature of goodwill in Brave v. Brave, 2014 Ark. Lexis 232 (April 17, 2014) by focusing on the salability aspect of goodwill as an asset. ┬áThe Supreme Court of Arkansas stopped short of directly addressing the issue of whether personal goodwill may contribute value to a business that is not a professional practice as the Arkansas Court of Appeals had done in this matter. ┬áRather, the Supreme Court of Arkansas found that the husband’s own valuation professional had characterized the goodwill as transferable and referred to its prior decision in Wilson v. Wilson, 294 Ark. 194, 741 S.W.2d 640 (1987), which in turn had referred to the Nebraska case of Taylor v. Taylor, 222 Neb. 721, N.W.2d 851 (1986), quoting as follows:

Where goodwill is a marketable business asset distinct from the personal reputation of a particular individual, as is usually the case with many commercial enterprises, that goodwill has an immediately discernible value as an asset of the business and may be identified as an amount reflected in a sale or transfer of such business. On the other hand, if goodwill depends on the continued presence of a particular individual, such goodwill, by definition, is not a marketable asset distinct from the individual. Any value which attaches to the entity solely as a result of personal goodwill represents nothing more than probable future earning capacity, which, although relevant in determining alimony, is not a proper consideration in dividing marital property in a dissolution proceeding.