Client has been a sole trader (IT consultant, but not a contractor) for just over a year.
He set up a ltd co 6mths ago and hasn't used it, but now wants to.
He has 3 customers so far, (two knew him personally before he went self-employed and recommended him to the other one) and a turnover of £30k.
I don't think there is any scope for goodwill on incorporation because it's all personal to him, but am I being over-cautious?
(The client has been speaking to the "man in the pub" whose goodwill was naturally into the £thousands then [edit: "when"] they did it.)
Thanks for any helpful opinions.
Replies (6)
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I would tend to agree that any goodwill, which will be minimal given the amount, would be personal to him.
How much "profit" is earned from the £30k turnover - this will also have a bearing on the goodwill figure!
Agree
It's early days yet but given the use of a trade name, time and a few more clients, "business Goodwill" might be established.
On the profits and goodwill calculation, you'd tend to deduct a manager's salary from the existing profits to establish the figure to multiply and so, again, at the level, I'd really not bother.
Are there any ongoing maintenance contracts?
If there are these are sometimes sold, so it may be possible to obtain an industry standard figure, eg 3 months contract value etc.