Written by Chris Walton, JDThe husband owned an advisory business. In the divorce, he argued that the trial court improperly included his personal goodwill in the business’s value — that the client relationships, the revenue, and the going-concern value were all tied to him personally and shouldn’t be divided as a marital asset. It’s the most common defense in business-valuation divorces, and it fails more often than the lawyers arguing it expect.
It failed here. In Donahue v. Donahue (Fla. Dist. Ct. App. 2d Dist., Nov. 15, 2024), the Florida appellate court upheld the trial court’s valuation, finding no evidence that the business depended on the husband’s individual skill, reputation, or continued participation. The record showed that the client relationships originated with a prior owner, did not decline when that owner departed, and were not tied to the husband personally. Without concrete evidence that the goodwill was personal, the court treated all of it as enterprise goodwill — a marital asset subject to equitable distribution.
For family law attorneys in Florida, Donahue arrives at a pivotal moment. Effective July 1, 2024, the Florida Legislature amended the equitable distribution statute (§61.075) to explicitly exclude personal goodwill from equitable distribution and to codify fair market value as the standard for valuing closely held businesses. Donahue is one of the first appellate applications of that framework — and it establishes that the burden of proving personal goodwill falls squarely on the spouse claiming it.
The husband’s argument was familiar: the advisory business’s value was attributable to his personal relationships with clients, his individual expertise, and his reputation in the market. Without him, the clients would leave and the business would be worth substantially less.
The appellate court examined the record and found the opposite. Three specific facts undermined the personal goodwill claim:
The client relationships originated with a prior owner. The husband didn’t build the client base from scratch. He acquired a business that already had established client relationships. Those relationships predated his involvement. The goodwill he was claiming as “personal” had existed before he arrived.
The client base didn’t decline when the prior owner left. This is the fact that killed the personal goodwill argument. If goodwill is truly personal to an individual, it should follow that individual out the door. When the prior owner departed, the clients stayed. The business continued. Revenue didn’t decline. That’s the definition of enterprise goodwill — value that survives the departure of any particular individual.
No evidence tied the clients to the husband personally. The husband asserted that clients were loyal to him. But he didn’t present evidence — client testimony, survey data, referral source analysis, or expert testimony on client retention drivers — establishing that the relationships depended on his individual skill or reputation rather than on the business’s brand, location, service offering, or institutional relationships.
Without that evidence, the court had nothing to support the personal goodwill exclusion. The default: all goodwill is enterprise goodwill, and it’s marital property.
Donahue is decided against the backdrop of Florida’s July 2024 amendment to §61.075, which made three changes that directly affect business valuations in divorce:
Personal goodwill is explicitly non-marital. The amended statute provides that the value of a closely held business, for purposes of equitable distribution, includes only enterprise goodwill — value “separate and independent from the owner’s personal skills, attributes and reputation.” Personal goodwill is carved out. This codifies what the common law had been moving toward after Thompson v. Thompson and Rosenberg v. Rosenberg, but gives it statutory force.
Fair market value is the standard. The statute now explicitly states that the standard of value for a closely held business in equitable distribution is fair market value. This means the business is valued as if sold to a hypothetical willing buyer — and DLOM, DLOC, and other market-based adjustments are at least conceptually on the table (though their application remains fact-specific, as Fair v. Fair in Louisiana illustrates).
The burden is on the claiming spouse. Donahue confirms what the statute implies: the spouse who wants to exclude goodwill as personal must prove it. The court won’t assume goodwill is personal just because the spouse operates the business. Without affirmative evidence — that clients follow the individual, that revenue depends on their personal skill, that the business would lose value without them specifically — goodwill is enterprise by default.
If you’re representing the spouse who owns the business and wants to exclude personal goodwill, Donahue tells you exactly what you need and what the husband in this case didn’t have:
Client testimony or declarations. The most direct evidence of personal goodwill is clients who will testify (or declare under oath) that they chose the business because of the individual owner and would leave if the owner left. The husband in Donahue didn’t present any client testimony. Without it, the claim that clients were “loyal to him” was unsupported assertion.
A “with and without” analysis from the valuation expert. The expert should model the business’s value with the owner’s continued participation and without it. The difference is the personal goodwill component. This requires projecting client retention rates, revenue attrition, and replacement costs under a departure scenario. If the expert can’t quantify the personal goodwill separately from the enterprise goodwill, the court has no basis to exclude it.
Evidence of client origination. Who brought the clients in? If the owner personally originated the relationships through individual networking, professional reputation, or personal referral networks, that supports personal goodwill. If the clients were acquired through a business purchase, inherited from a prior owner, or generated through the business’s marketing and brand, that supports enterprise goodwill. In Donahue, the clients came with the prior owner’s business — which was the dispositive fact.
Historical evidence of what happened when key people left. The most powerful evidence for or against personal goodwill is what actually happened when someone departed. Did clients follow the departing individual? Did revenue decline? In Donahue, the prior owner left and clients stayed. That’s a natural experiment proving the goodwill was enterprise. If the business has experienced prior departures of key personnel, the retention data from those events is the strongest evidence you can present.
Non-compete or non-solicitation agreements. The existence (or absence) of restrictive covenants can be relevant. If the owner has a non-compete that prevents them from taking clients if they leave, the enforceability of that agreement affects how much goodwill is transferable to a buyer — and therefore how much is enterprise. Conversely, the absence of a non-compete and the practical ability of the owner to take clients upon departure supports a personal goodwill argument.
Donahue fits into a national trend toward requiring affirmative evidence of personal goodwill rather than assuming it exists because the owner operates the business. The majority position across states (roughly 24 of those that have addressed the issue) is that personal goodwill is non-marital while enterprise goodwill is marital. But the evidentiary burden varies:
In Washington, McLelland v. Paxton provides a six-factor test (locations, trade name, phone/website, staff, patient files, billing) for determining whether entity goodwill exists in a professional practice. In Louisiana, Fair v. Fair refused to apply a DLOM because the business wasn’t being sold — and excluded 25% of goodwill as personal based on the owner’s individual relationships. In Florida after Donahue and the statutory amendment, the framework is clear: personal goodwill is non-marital, but you must prove it’s personal with concrete evidence, or the court treats it as enterprise.
For family law attorneys in any jurisdiction, the practical lesson is the same: the personal goodwill defense requires preparation. It is not enough to assert that the owner is important to the business. You must present evidence — client testimony, retention data, expert analysis, origination records — that the specific value you want to exclude would leave with the owner. Donahue shows what happens when that evidence isn’t there.
Not every business has enterprise goodwill, and not every personal goodwill defense fails. The argument is strongest when the business is a solo professional practice (one doctor, one lawyer, one advisor) where clients explicitly chose the individual, when the owner originated all or most of the client relationships through personal networking and reputation rather than through business marketing or acquisition, when prior departures of key personnel caused measurable client attrition, and when there is no brand, trade name, or institutional infrastructure that would retain clients independently of the owner.
Conversely, the argument is weakest when — as in Donahue — the client base was acquired, survived a prior owner’s departure, and has no demonstrable dependence on the current owner. In that scenario, the business’s value is in its institutional client relationships, its systems, and its brand. That’s enterprise goodwill, and it’s marital property.
Donahue v. Donahue establishes a simple principle with significant consequences: in Florida, if you want to exclude goodwill as personal, you have to prove it. Assertion isn’t enough. The court examined the record for concrete evidence that the advisory business depended on the husband’s individual skill, reputation, or continued participation — and found none. The client relationships predated him. They survived the prior owner’s departure. They weren’t tied to him personally. Without that evidence, all goodwill was enterprise, and all of it was subject to equitable distribution.
For the spouse keeping the business: build the personal goodwill record before trial. Client declarations, retention data from prior departures, expert testimony with a with-and-without analysis, and origination evidence. For the spouse being bought out: challenge the personal goodwill claim early by asking for the evidence. If the other side can’t produce clients who would leave, revenue that would decline, or an expert who can quantify the personal component separately, the Donahue default applies: all goodwill is enterprise.
If you’re handling a divorce involving a closely held business and need to determine whether the goodwill is enterprise or personal — or need a with-and-without analysis to quantify the split — happy to talk through the valuation approach. The evidentiary preparation before trial matters more than the expert’s methodology at trial.
Schedule a free consultation meeting to discuss your valuation needs.
