Isolating "personal" goodwill can be highly advantageous for sellers. Financial conditions are clearly tightening. But, if you have clients thinking about selling their businesses, there’s no reason to rush the transaction. When the future is uncertain, successful entrepreneurs and their advisors are tempted to “get while the getting’s good.” But without taking the time to do the exit planning correctly, your clients could be leaving millions of dollars on the table. When clients sell a company, especially if it’s a professional service firm or a company built from the ground up, they have an important, but misunderstood asset called “goodwill.” That’s the amount a buyer pays them above and beyond the fair market value of the business’ hard assets and liabilities. Some of the goodwill is “enterprise” goodwill and some is “personal” goodwill. In a minute I’ll explain why isolating personal goodwill can be highly advantageous for sellers. Goodwill Hunting: Three Steps Goodwill refers to the value of a business’s intangible assets such as customer or subscriber lists, patient lists and medical records, business, vendor and client relationships, etc. For federal income tax purposes, goodwill must be accounted for in tax filings and may attach to either the business […]
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