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Goodwill is a business asset

The Arkansas Democrat-Gazette reports (paywall ahead) on a recent Arkansas Supreme Court case involving a well-known Little Rock restaurant and its divorcing owners. The Court held that the corporate entity owned the "goodwill" of A Brave New Restaurant separate and apart from the chef's reputation. Because the two spouses owned the corporation, they had to divide the business equally, including the goodwill, to the tune of $420,000 each.

Goodwill is a common concept in trademark law. The term literally means the reputation of a business, although it can include products as well. Typically, the value of goodwill is the theoretical price someone would pay for a business over and above the tangible assets of the business, like land, buildings, fixtures, and accounts receivable.

For products, goodwill is a similar concept. It means consumer recognition of a particular name, logo, or sound. Companies like Apple create an association in the mind of consumers between an apple missing a bite and computers. This happens through extensive marketing and sales of a product. The resulting association in the mind of consumers is known as goodwill. 

Goodwill is important for businesses. It is a source of new customers through word of mouth. It also means existing or former customers are more likely to return to a particular business for their next purchase. And, when it comes time to sell a business (or take it through a stock IPO), goodwill plays a significant role in the purchase price. 

At the Chaney Law Firm, we have experience protecting and valuing goodwill and other intangible assets as part of an overall business strategy. We design employment agreements for our clients so that there is no dispute over who owns goodwill and other intellectual property of a business.

We'd be happy to help you with your business. Thanks for reading.