What is Goodwill?
Goodwill is an intangible asset that comes with the purchase of a business by another business. It is classified as the amount you paid for the business, minus the fair market value of the tangible assets, the liabilities, and the intangible assets. On a balance sheet, goodwill only shows up during the sales process. An example is if a business sells for $1,000,000, assets are $750,000, liabilities are $100,000. The remaining $150,000 is classed as goodwill and could be based on the business having a solid customer base, quality branding that is highly recognised, a good social media following, reputable customer and employee relations, and so on.