Foley & Lardner LLP senior counsel Sonia Kothari authored the Tax Notes article, “What’s in a Name? Personal Goodwill in a Company Sale,” surveying relevant case history around personal goodwill and providing practical guidelines for sellers.
Kothari assesses the tax implications involved in an asset and a stock sale, details what comprises personal goodwill and how it has been considered in the courts, and shares important considerations for an individual seller looking to demonstrate the value of their personal goodwill.
“An individual seller with the right set of facts and circumstances, adequate documentation, and cooperative buyer can benefit from selling their personal goodwill as an asset separate from the enterprise,” Kothari concludes. “Pay attention to the economics of the deal. If the economic substance of the agreement between the parties does not correspond with the intended tax treatment, there is greater risk of recharacterization.”
