Legal Definitions - goodwill

Definition: Goodwill refers to the positive reputation or recognition that a business has earned over time. It is an intangible asset that is difficult to quantify, but it can be a valuable part of a company's overall worth. Goodwill is often calculated as the difference between the purchase price of a company and the sum of its fair market value.

Example: A popular restaurant chain has built up a loyal customer base over the years. People know that they can expect high-quality food and excellent service when they visit one of the chain's locations. This positive reputation is an example of goodwill.

Explanation: The restaurant chain's goodwill is based on the positive experiences that customers have had in the past. This reputation can be a valuable asset for the company, as it can attract new customers and help to retain existing ones. When the company is sold, the value of its goodwill may be included in the purchase price.