In the business world, goodwill is a complex entity, combining tangible and intangible elements.
At the heart of this dynamic, the customer plays a key role, shaping the very essence of this economic structure.
What does goodwill include?
Goodwill, the essential foundation of any commercial activity, brings together a variety of elements, both tangible and intangible, which play a crucial role in the running of a business.
This range of elements forms an indissociable whole, particularly in the case of franchising, where the cohesion and uniform transmission of business practices are of particular importance.
Goodwill is not limited to the physical world; it has also evolved to adapt to the digital context.
The emergence of online commerce has given rise to electronic goodwill.
Although its component categories are similar to those of traditional commerce, specific adjustments are required to operate an online business.
Internet customers differ from those of physical stores.
It is also important to distinguish between the composition of the goodwill and the goodwill itself.
The disappearance, destruction or sale of individual components would not result in the dissolution of the goodwill, but its existence is inseparable from the presence of a clientele.
Goodwill is of the utmost importance, playing a decisive role in assessing a company’s market value.
Its value is intrinsically linked to that of the clientele it holds.
On the other hand, it is imperative not to confuse two crucial terms: clientele and goodwill.
While goodwill represents a passive clientele, such as that of a business with a monopoly in a specific location, the creation of a business requires the establishment of its own clientele.
This clientele is committed to the merchant and his products, and willing to travel to access them.
What are tangible and intangible elements?
Tangible assets include items such as merchandise, tools, fixtures and fittings, and equipment.
An accurate valuation of tangible assets is crucial, given their specific tax treatment, which may entail VAT payment obligations.
Intangible assets fall into two distinct categories.
Firstly, ordinary intangible assets include essential components such as goodwill, the right to a lease, and a business name or trademark.
These elements are generally transferred simultaneously with others, unless otherwise stipulated in thedeed of transfer.
For example, if the transferee wishes to rename the business, or if the transferor prefers to keep his sign for a future installation elsewhere, a specific clause may be included in the deed.
Extraordinary intangible assets include literary, artistic and industrial property rights, such as patents, trademarks and designs.
Official awards or medals obtained in the course of the seller’s business also fall into this category.
In principle, these intangible assets are not intended to be sold with the business, unless clearly stipulated otherwise in the deed of sale.
It is imperative to carry out a meticulous valuation of these intangible assets, as their volatile nature can present challenges.
The clientele often linked to the personality of the operator, patents likely to be contested, a lease incompatible with certain activities, or a project to align facades are all factors to be taken into account.
Buying a business: what are the advantages ?
For anyone planning to launch a new business, the acquisition of goodwill offers significant advantages.
On the one hand, the entrepreneur immediately benefits from the tangible and intangible components, including operational premises and, where applicable, the necessary equipment.
The continuity of the business also ensures a customer base, guaranteeing minimum sales from the very first months.
In addition, the buyer inherits the image and reputation of the previous operator or brand, which can facilitate market entry.
The capital acquired also includes a directory of suppliers and partners, offering a smoother transition.
Who can buy a business?
In terms of ownership, anyone legally capable of owning property can become the owner of goodwill.
This includes individuals, corporations and other legal entities such as partnerships, associations and trusts.
The diversity of entities that can acquire goodwill reflects the legal flexibility surrounding these transactions.
How to buy a business?
The acquisition of a business is a complex and official procedure.
The seller must inform the town hall of his business sale project.
The mayor then has two months in which to exercise his right of pre-emption.
Then there’s the drafting of the deed of sale for the business, which requires the inclusion of several crucial items of information, such as the sale price, the status of any liens and pledges encumbering the business, and the sales figures and results for the previous three years.
Other details, such as the name of the previous vendor and the purchase price, as well as the characteristics of the commercial lease, must also be included in the deed.
The purchaser, for his part, must register the deed of sale with the Service des Impôts des Entreprises to determine registration duties and additional taxes.
In addition, the purchaser must publish a notice in a legal gazette within 15 days of the sale.
This publication is followed by an application for registration with the Registre du Commerce et des Sociétés by the Centres de Formalités des Entreprises (CFE).
Finally, the purchaser must publish a notice in the Bulletin Officiel des Annonces Civiles et Commerciales (BODACC) within three days of publication of the legal announcement.
What are the different ways of transferring a business?
The transfer of a business may be costly, through a sale or contribution to a company.
It can also take place free of charge, as part of an inheritance.
In the latter case, the mechanism of preferential allocation is essential to guarantee the preservation of the economic unity of the business.
Pledging of business assets
The pledge of a business is an essential mechanism in the financial sector, providing an effective guarantee for creditors.
This contract, registered and filed with the Clerk’s Office for registration, enables the debtor to pledge the intangible elements of the business to the creditor.
These include the customer base, goodwill, name, sign and leasehold rights.
In the event of non-payment of the debt, the creditor obtains a right over these elements.
This type of pledge can be established by court order, particularly when the debtor’s financial situation involves risks, or when the credit requested is not directly linked to a specific investment.
Goodwill is the backbone of any commercial activity, comprising a variety of tangible and intangible assets.
Its acquisition offers significant advantages, and its transfer requires a thorough understanding of the legal mechanisms involved.
