Understanding the differences between business and professional goodwill can empower you during valuation engagements and other legal matters.
Goodwill is the value of a trade or business based on expected continued patronage because of its reputation and other factors. The Tax Court recognizes a distinction between the goodwill of a business and the goodwill attributable to the owners of the business, and this difference can impact taxes and other financial matters.
Enterprise goodwill (or “business goodwill”) is directly associated with the business. Consumers seek out the enterprise, are referred to the enterprise, or repeat patronage due to the enterprise. Personal goodwill (or “professional goodwill”) is directly associated with an individual. Consumers seek out the individual, are referred to the individual, or repeat patronage due to the individual.
Understanding these differences can lead to enhanced wealth.
To support owners, executives, accountants, and attorneys, we created a short and helpful ebook to better explain how to successfully navigate the process of quantifying the proper value to a company’s goodwill. We hope this ebook will provide you a structure to better manage goodwill decisions.
You’ll learn more about the distinctions between “Personal Goodwill” and “Enterprise Goodwill,” including both clear and nuanced attributes. We illustrate applications of these attributes in real-world situations. We also include two court cases that helped set the precedent for Personal Goodwill and demonstrate why it is imperative to evaluate both tangible and intangible assets. Finally, there is a review of Tax Court rules and tips for deciphering them.
We hope this ebook will give you the information you need to make confident decisions to protect company value and maximize personal wealth.