Good Will

• Author: Jeffrey Lehman, Shirelle Phelps

Page 116

The favorable reputation and clientele of an established and well-run business.

The value of good will is ordinarily determined as the amount a purchaser will pay for a business beyond the monetary value of its tangible property and money owed to it.

Good will is regarded as a property interest in and of itself, although it exists only in connection with other property, such as the name or location of the operation. Good will exists even in a situation where the business is not operating at a profit. Certain courts refuse to recognize good will that arises out of the personal qualities of the owner. For example, a physician cannot sell good will when selling the office building and other physical assets of his or her practice, since the physician's reputation is based solely upon personal professional abilities.

A transfer of good will from one individual to another can take place as a bequest in a will or through a sale. Ordinarily, when an individual sells the property to which good will is connected, it is automatically transferred to the buyer. However, the buyer and seller can alter this arrangement or specify details in their...