When valuing a small or family-owned business in a Virginia divorce, parties need to be aware of the concept of “goodwill.” Goodwill is divided into two main types: personal goodwill and professional goodwill. Though sometimes hard to tease apart, once a judge determines how much of each type of goodwill is contributing to the value of a divorcing-spouse’s business, that ruling can be monumental to the financial well-being of the husband and wife.
Settling a divorce case in Virginia, where one of the parties owns a business, can be extremely challenging. Businesses are considered “property” and, just like a house or a retirement fund, are divisible upon divorce. Therefore, in a mediated divorce settlement, the value of a family business must usually be quantified in order for both parties to make informed decisions with regard to which party retains which asset/liability post-divorce.
In Virginia, a couple seeking divorce must live separate and apart for one year when they have minor children. With no kids, 6 months is the rule. . . . but only if that couple also has a properly drafted and signed Property Settlement Agreement (PSA).
The required period of separation was intended, by the lawmakers, to mean that the husband and wife would actually live in separate residences.
In Virginia, property that is owned pre-marriage is known as “separate property”. Separate property may consist of:
tangible assets (e.g. automobiles, antiques, furniture),
liquid assets (e.g. bank accounts, mutual funds, stocks),
retirement assets (e.g., 401(k)s, TSPs, IRAs, pensions),
real estate, and
Under §20-107.3 of the Virginia Code, the spouse who came into the marriage with the separate property is permitted to keep that property as his or her own individual property.
How Do Virginia Courts & Mediators View Equitable Distribution When a Husband and Wife Commingle Separate (Non-Marital) and Marital Property?
In Virginia divorce law, there is a lot of confusion when it comes to the division and distribution of property when the divorcing couple does not agree on whether that property is “marital property”, “separate property” or a combination thereof (known as “hybrid property”). This confusion is unfortunate because how property is classified is extremely important in terms of what is on and what is off limits to Virginia judges when they make their “taketh and giveth” decisions.