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Good Will

business property sale purchaser

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 sale agreement. A former owner of a business has no right to interfere with the subsequent owner's enjoyment of good will following a sale transferring good will, even in the event that the sales contract does not specifically so indicate. In the event that the purchaser wants to prevent the seller from establishing a competing business in the same vicinity, the purchaser must bargain for such a provision in the contract. An agreement not to compete, sometimes called RESTRICTIVE COVENANT, differs from good will. However, an individual who sells the good will of his or her business is not permitted to solicit former clients or customers or lead them to believe that he or she is still running the same business.

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