[Jewelry making - Article 00149] - Re: [Orchid] Value of a name

[Sheridan E. Reed]

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    Karen - my 2 cents worth on issues of the Goodwill of a business.  I
    see these issues in court where parties are disputing the value of a
    business such as married couples in a divorce, business partners
    where one wants out and one wants to continue the business, families
    where one person wants to keep operating the family business
    previously  owned by a now deceased family member and other family
    members simply want to be paid their share of the "value" of the
    business, etc.    As Ivy, in Oakland stated, Goodwill is always
    analysed in connection with a sale - but in Court the "sale" is
    often an involuntary sale resulting from the severing of legal ties.
     The way it is done here is that "experts" - normally accountants or
    business evaluators render opinions of what a reasonable buyer would
    pay and a reasonable seller would accept upon the sale of the
    property.  That is, what the actual parties the the lawsuits would
    pay or accept becomes irrelevant.  We deal with the "reasonable
    person" standard to reach a value when the parties are unable to do
    it themselves.   The things considered by those experts are the
    value of the land, the other assets and the goodwill.  There are a
    number of ways to evaluate goodwill but I think Doug Zaruba outlined
    virtually all of them. The one thing I would add is that the
    reasonable buyer is supposed to know everything a reasonable buyer
    would know - both the good and bad about the business - i.e, would
    have conducted a thorough investigation into the business, and the
    resaonable seller is presumed to have disclosed everything any
    reasonable seller or the law would require.  Goodwill in these
    circumstances is normally the value a reasonable buyer would pay for
    the business over the value of the assets because of the value of
    the anticipated revenues to be generated by the "name" or reputation
    or respect of the business itself.  Hope this helps. Sheridan Reed

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