Quick answer: When a marriage involves a closely-held business, the value of that business is often the largest and most contested number in the case — and it is a forensic-accounting calculation, not a legal one. In a Florida divorce, the analysis runs through a predictable arc: determine what part of the business is marital versus non-marital under §61.075, pick a valuation date and standard of value, value the business, then make the adjustments that decide the real number — separating personal goodwill (not marital) from enterprise goodwill (marital), normalizing the owner’s compensation, avoiding the “double dip,” and deciding whether discounts apply. The court decides the legal questions; my job is to calculate each piece accurately and defensibly so the court can rule on a sound number.
This is the hub of a series; each section below links to a focused article on that step.
Why the business number is the hard one
Bank accounts and brokerage statements speak for themselves. A privately held business does not — there is no ticker, no daily price, and the owner-spouse usually knows far more about it than anyone else in the room. That information gap is exactly why a forensic CPA is retained: to convert the company’s records into a value that survives cross-examination, and to make sure the marital estate is neither overstated nor understated. The steps below are the order in which I work the problem.
Step 1 — What part of the business is marital?
Under Fla. Stat. §61.075, marital assets generally include those acquired during the marriage, while assets owned before the marriage (or received by gift or inheritance) are non-marital — but the appreciation of a non-marital business during the marriage can become marital to the extent it resulted from marital labor or marital funds. So a business one spouse started before the marriage is not automatically off the table; the growth during the marriage may be partly marital. (This mirrors the active-vs-passive question I analyze for investment accounts — see the active-vs-passive appreciation hub. For a business, the “effort” prong is usually front and center because the owner-spouse typically worked in the company.) Classification is ultimately the court’s legal call; I quantify each component so the court can apply the law to real figures.
Step 2 — Valuation date and standard of value
Two threshold choices move the number before any calculation begins:
- Valuation date. Florida courts have discretion to choose a date that is just and equitable; the date of filing is a common reference point, but it is not the only one, and the right date is fact-specific. Because a business’s value can swing materially between dates, the date is frequently contested. (See valuation date & standard of value.)
- Standard of value. What does “value” mean here — what a hypothetical buyer would pay (fair market value), or the value of the business to the owner who will keep it? The choice affects whether and how goodwill and discounts come in. I state the standard I am applying and why, because an undisclosed or shifting standard is the first thing an opposing expert will attack.
Step 3 — Personal vs. enterprise goodwill (the marquee issue)
This is where Florida divorces are often won or lost. Goodwill is the part of a business’s value above its identifiable tangible and financial assets. Florida law splits it in two:
- Enterprise goodwill — value that belongs to the business itself and would transfer to a buyer (systems, location, brand, recurring customers, trained staff). This can be marital.
- Personal goodwill — value tied to the individual spouse’s reputation, skill, and relationships. In Thompson v. Thompson, 576 So. 2d 267 (Fla. 1991), the Florida Supreme Court held that for goodwill to be a marital asset it must exist separately from the reputation or continued presence of the individual. Purely personal goodwill is not marital — it is, in substance, that spouse’s future earning capacity.
Separating the two is a calculation, and it is the heart of my engagement on these cases. Illustrative example (hypothetical, no client data): a practice is valued at $2,000,000, of which $600,000 is goodwill above tangible and financial assets. If the analysis shows $400,000 of that goodwill depends on the owner-spouse personally (their license, name, and relationships) and only $200,000 would survive a sale to a new owner, then roughly $400,000 is non-marital personal goodwill and stays out of the marital estate. Getting that split right can change the distributable value by hundreds of thousands of dollars. (Full method: personal vs. enterprise goodwill.)
Step 4 — Normalize the owner’s compensation
Owners of closely-held businesses rarely pay themselves a clean market salary. Some take far more than market (which understates the business’s true earnings and its value); some take far less and leave profit in the company (which overstates earnings). Before I value the company on its earnings, I determine reasonable compensation for the owner’s role from sourced market data and adjust — a step that simultaneously affects the business value and the income available for support. Done carefully, it keeps those two numbers consistent; done carelessly, it inflates one at the other’s expense. (See normalizing officer and owner compensation and income normalization in a Florida divorce.)
Step 5 — Avoid the “double dip”
Here is a trap that quietly inflates a settlement: valuing the business on the owner’s earnings stream, and then awarding alimony out of that same earnings stream — counting one dollar twice. Whether and how to prevent double-counting is a legal determination, but the CPA has to make the streams visible so the court can decide. I separate the income that supports the business value from the income that supports a support award, so the same dollar is not distributed and then paid again. (See the double dip.)
Step 6 — Do discounts apply?
For a minority interest or an interest that is hard to sell, valuation theory sometimes applies a discount for lack of marketability or lack of control. In the divorce context, whether those discounts are appropriate is contested and fact-dependent — applying them can understate the marital estate, while ignoring them can overstate it. I calculate the value both with and without supportable discounts and disclose the basis for each, rather than baking in a discount the record cannot support. (See valuation discounts in divorce.)
The CPA’s role vs. the court’s
Across every step, the boundary is the same: I calculate; the court decides the legal questions — classification, the valuation date, the standard of value, and whether a given discount or the double-dip principle applies. My value is most useful to the court when each component is sourced, each judgment is disclosed, and the result is presented as a defensible figure (or a range) rather than a single number asserted without support. That is what makes it hold up when the other side’s expert tests it.
If you are an attorney handling a Florida divorce that involves a closely-held business or professional practice, Joey Friedman, CPA, P.A. prepares business valuations, goodwill allocations, and supporting calculations statewide, and testifies to them.
The full series
This hub is the overview. Each spoke below works through one step of the divorce business-valuation analysis in depth:
- Personal vs. enterprise goodwill (the marquee issue)
- The “double dip”: counting the same dollar twice
- Valuation date & standard of value
- Do valuation discounts apply? (DLOM / lack of control)
- What to give your forensic CPA (the document checklist)
Related resources
- Equitable Distribution Analysis in a Florida Divorce
- Marital vs. Non-Marital Appreciation of Investment & Retirement Accounts
- Alimony & Income Reconstruction in Florida Support Cases
- How Real Estate Is Handled in a Business Valuation
Frequently asked questions
Is my spouse’s business marital property in a Florida divorce?
Often partly. Under §61.075, a business acquired during the marriage is generally marital; one owned beforehand is non-marital, but its appreciation during the marriage can be marital to the extent it resulted from marital effort or marital funds. The classification is the court’s call, made on the figures the analysis provides.
What is the difference between personal and enterprise goodwill?
Enterprise goodwill belongs to the business and would transfer to a buyer; it can be marital. Personal goodwill is tied to the individual spouse’s reputation and skill, and under Thompson v. Thompson (Fla. 1991) it is not a marital asset because it cannot exist separately from that person.
What is the “double dip” in a divorce business valuation?
It is counting the same income twice — once to value the business and again to award alimony from that same earnings stream. Separating the streams so a dollar is not distributed and then paid again is a key part of a careful analysis.
Who decides the value of the business — the CPA or the judge?
The forensic CPA calculates the value and explains the assumptions; the judge (or the parties in settlement) decides the contested legal questions and the final number. The calculation exists to give the court a sound, defensible basis to rule on.
By Joey N. Friedman, CPA, ABV, M.Acc, MIB — President, Joey Friedman, CPA, P.A.