Is anyone familiar with the Personal Goodwill/C-Corp tax dodge?

by a searcher

5 years ago

If a third party appraisal claims the business owner has significant personal goodwill, wouldn't that devalue the business? For example, if the company is worth $5mm, but the owner's personal goodwill creates $2mm of that value then would you really feel comfortable paying $5mm for the business? Isn't the appraisal claiming that the business is immediately worth less once the owner is no longer involved?

If you want to learn more reference the Martin Ice Cream case.

16 likes
216 views
13 comments

intermediary from Oklahoma State University

You are buying the personal goodwill in addition to the business's go0dwill. You are paying part of the goodwill directly to the owner, but the total amount is not impacted.

5 years ago | like reply | 0 likes

searcher from University of Florida - Warrington College of Business Administration

The designation of personal goodwill doesn't impact the goodwill on the balance sheet and does not impact valuation. It does have tax impacts for the seller.

5 years ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Self Funded Acquisition: A few Things I Learned

What are market terms for Seller Notes?

Examples of self-funded searcher websites

Investor Looking for Self-Funded Searchers Seeking Equity

How to spot FAKE EBITDA, without spending a nickel on due diligence...

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.