Personal Goodwill Employment Agreement
In cases where good value is an important asset, the ability of the parties to structure the sale in part as a sale of personal value by the shareholder and partly as a sale of its assets by the company may provide both parties with the desired results. The buyer receives an increased tax base for all acquired assets, including the personal value. The shareholder will pay only two tax brackets on assets sold by the company; the personal value sold directly by the shareholder by the shareholder is subject to individual taxation at the long-term rate of return, provided it is held for more than one year. The personal good-in differs from the good incorporation of the entity by the fact that the personal good-in represents the value resulting from a person`s personal service to that entity and that an asset owned by the individual is not to the entity itself. This value would include an individual`s professional reputation, personal relationships with customers or suppliers, technical know-how or other clearly personal skills that would bring economic benefits to a business. This economic advantage exceeds the normal return generated by other tangible or intangible assets of the company. On the other hand, personal value existed when shareholders` non-compete agreements expired before they attempted to liquidate a company and distribute their intangible assets.7 The tax court explained that shareholders who had previously signed non-compete agreements that had paid their value to the company had not entered into such contracts at the time of the dissolution of the company and that the personal value of the shareholders did not belong to the company. Under the right circumstances and with the right planning, personal goodwill can bring considerable benefits to the seller and buyer of a closely managed business. However, caution should be exercised in the pursuit of the career, as it must be identified at an early stage, quantified and carefully documented. The courts have always held that personal value exists when a person has the right to sell his or her personal business will. Conversely, personal value is transferred to a capital company and therefore does not exist when competition or employment contracts are in force. These agreements show the intention to transfer good personal re-operation and grant exclusive rights to the company to ensure that the individual cannot benefit from personal value without working for the company. Some court proceedings have been useful in setting a precedent for distinguishing between corporate overvaluedness and personal overvalue.