Goodwill Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Goodwill, written in plain English, along with examples of how it is used.

What is Goodwill?

(n) Goodwill is the advantage and reputation gathered, build-up or otherwise acquired by a business house during the course of its business life by better and satisfactory services. Good will is an asset to any business because it gives advantages over the competition

History and Meaning of Goodwill

Goodwill is an intangible asset of a business that represents the value of its reputation, brand name, customer base, and other intangible elements that contribute to its overall value. It reflects the strong and loyal relationship a business has built with its customers over the years. The term "goodwill" dates back to the 1800s when it was first used to describe a business's intangible assets.

Examples of Goodwill

  1. Suppose a business has been operating for ten years and has built a solid reputation for providing high-quality products and excellent customer service. This reputation will increase the company's goodwill and, in turn, its overall value.

  2. Another example is when a business acquires another business, it is common to pay more than the book value of the assets to obtain its goodwill.

  3. The goodwill of a celebrity is also an example of goodwill. Celebrity goodwill can be monetized through endorsements, licensing deals, and other commercial arrangements.

  4. Finally, a company that makes financial donations or charity work can build goodwill as customers will feel good about purchasing goods and services from a socially responsible entity.

Legal Terms Similar to Goodwill

  1. Trademark: A trademark is a legal term used to describe a company's brand name or logo that is used to identify its products or services.

  2. Patents: Patents are a legal term that describes intellectual property such as inventions or designs.

  3. Trade Secrets: Trade secrets are proprietary information that some businesses protect by restricting employee access to it.

  4. Copyrights: Copyrights protect original creative works such as music, art, and literature.

  5. Proprietary Software: Proprietary software refers to software that is developed and owned by a company and cannot be copied or distributed without permission.