goodwill

The favor which the management of a business wins from the public. The favorable consideration shown by the purchasing public to goods or services known to emanate from a particular source. White Tower System v. White Castle System of Eating Houses Corporation, C.C.A.Mich., 90 F.2d 67, 69.

Property of an intangible nature, commonly defined as the expectation of continued public patronage. In re Marriage of Lukens, 16 Wash.App. 481, 558 P.2d 279, 280.

The custom of patronage of any established trade or business; the benefit or advantage of having established a business and secured its patronage by the public. And as property incident to business sold, favor vendor has won from public, and probability that all customers will continue their patronage. It means every positive advantage that has been acquired by a proprietor in carrying on his business, whether connected with the premises in which the business is conducted, or with the name under which it is managed, or with any other matter carrying with it the benefit of the business. The excess of cost of an acquired firm or operating unit over the current or fair market value of net assets of the acquired unit. Informally used to indicate the value of good customer relations, high employee morale, a well-respected business name, etc. which are expected to result in greater than normal earning power. The ability of a business to generate income in excess of normal rate on assets, due to superior managerial skills, market position, new product technology, etc. The capacity to earn profits in excess of a normal rate of return due to establishment of favorable community reputation and consumer identification of the business name. North Clackamas Community Hospital v. Harris, C.A.Or., 664 F.2d 701, 706.

As applied to law firms, term refers to ability to attract clients as result of firm's name, location, or the reputation of lawyers. Bump v. Stewart, Wimer & Bump, P.C., Iowa, 336 N.W.2d 731, 736.

For accounting purposes, goodwill has no basis unless it is purchased. In the purchase of a business, goodwill generally is the difference between the purchase price and the value of the assets acquired. Goodwill is an intangible asset and cannot be amortized for tax purposes.

See also amortization