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Personal Good Will Has Value

Most business sales are inclusive of all assets. This generally includes goodwill, which is the intangible value.

In many situations, the business’s reputation is tied closely to the seller. The owner has generated personal goodwill. It may be difficult to value, but it is a real asset.

In some sales it is favorable to separate personal goodwill from other assets, particularly in C Corporations. This is a useful strategy for certain ownership structures, offering the seller an opportunity to claim a portion of the proceeds as capital gains and get a favorable tax rate. And because it is an asset, the buyer still gets the depreciation.

This can’t be a last minute decision. Think it through. A special valuation is needed. Specific wording must be used in all documents. Consult your accountant and attorney first. But handled properly, the tax savings can be substantial.


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