Goodwill in a Professional Practice

Goodwill in a Professional Practice

Goodwill in a Professional Practice

In re Marriage of Aufmuth was decided in 1979, but it is still considered valid law.

The parties were married several years. The husband was an attorney and during the marriage he became a five percent shareholder in a law firm. However, at the time of the divorce he had only been practicing law for seven years and had been a shareholder in the law firm for only two years. When he became a partner, he exchanged a promissory note in the sum of $16,300 for his interest in the law firm. His interest in the firm was subject to a repurchase agreement, and the price of his interest was fixed according to a formula. At issue in the trial court was whether or not the husband owned a divisible goodwill interest in the law firm.

The wife argued that the husband’s expectation of future professional income was goodwill. The judge found that an expectancy of future earnings is not synonymous with the goodwill of a professional practice. The husband’s interest in the law firm was limited by his agreement and the agreement was based on an arm’s length transaction. Implicit in the agreement was the understanding that the husband had no goodwill interest in the law firm. The formula itself excluded any goodwill interest and even if any could be found, the attorney in this case had only been a partner in the firm for two years. The wife appealed the finding.

The appellate court upheld that aspect of the order finding that there was no goodwill in the husband’s professional practice.

If you need legal advice and are looking for a family law lawyer in Orange County to address the community interest in a business or any other divorce matter such as legal separation, annulment, custody, spousal support, child support, or property division, please consider Treviño Law in your divorce attorney search. We are located in Laguna Hills right off Lake Forest exit to both the 405 and 5 freeway.

Although the posting of this information can be considered free legal advice for a divorce in Orange County, it does not address other factors which may play a significant role in a particular dissolution. Circumstances in your divorce may alter the results in your dissolution.

Please note that this legal advice does not establish a family law attorney-client relationship. This is a legal advertisement for Treviño Law, Inc.

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