Why is the retiring or deceased partner entitled to his share of goodwill at the time of retirement/death of the partner? |
Goodwill is earned solely by the retiring/deceased partner Goodwill represents the efforts of all existing partners Goodwill is a legal requirement Goodwill is an intangible asset |
Goodwill represents the efforts of all existing partners |
Goodwill is an intangible asset that represents the reputation, brand value, customer loyalty, and other non-physical assets of a business. It is built over time through the joint efforts of all partners in a partnership. When a partner retires or passes away, they are entitled to their share of the partnership's goodwill because they have contributed to its creation through their efforts and contributions. Since goodwill is the result of the collective efforts of all partners, it would be unfair for the retiring or deceased partner to leave the partnership without receiving their rightful share of the goodwill. Therefore, it is considered a fair practice to compensate the retiring or deceased partner for their share of the goodwill, which has been earned by the firm with the efforts of all the partners. |