Most people, including many experienced attorneys and certified public accountants (CPAs), are surprised to learn that an individual owner, shareholder or member can individually own a corporation’s or limited liability company’s bundle of rights commonly known as goodwill.
The same corporation or company may have both enterprise goodwill and personal goodwill. Many of the original cases in this area arose in the context of divorce where an ex-spouse sought compensation or ownership in a divorce. Careful planning can use this individual ownership interest to save substantial tax in the event of the sale of the corporation or company. We recently used the individual ownership of goodwill to save our client in excess of $1.2 million in tax on the sale and a safe, predictable stream of income in the amount of $180,000 per year for his and his spouse’s lives.
