Personal Goodwill in the Sale of an Accounting or CPA Practice

Selling a C-corporation can be a very difficult endeavor mostly due to the fact that C-corporations are subject to double taxation. Income from operations, gains from the sale of assets and liquidation gains can all be considered in the double taxation doctrine established by the IRS. If you find yourself in this position as a CPA or accounting practice principal you have just a few options if you want some of the proceeds to end up in your pocket.

The first option is to try to sell the stock of your privately held firm. Stock sales will be subject to capital gain, which will be far beneficial to having to take all of your normal income as well as the income from the sale of a business and perhaps property into a double taxation situation. Stock sales are few and far between however and rarely transpire in private professional practices. Legally, many attorneys will steer away from a stock sale for implied liability sake. Because the C entity does not dissolve in a stock sale, it also carries with it all of the prior liabilities or contingent liabilities that may be still unknown. Legally, these liabilities carry risks that most attorneys choose to avoid.

A second option but one that is rarely used is “personal good will”. If the seller can prove that the goodwill carried is actually the “personal good will” of the principal instead of corporate good will it can have a very nice impact on tax. The gain, that would normally have been associated with the goodwill of the company and therefore subject to double taxation can be sold as personal good will and the gain can be reduced by the amount of the personal goodwill. Given that accounting practices have very few tangible assets this can potentially have a huge impact on taxes.

The third option is to simply pay the tax. This however, does not need to be the only option. You may find after talking with various experts that a personal goodwill transaction is not for you but the options that provide potential sellers with multiple paths are how we create value for others.

If you are selling a CPA Firm or accounting practice and the entity that holds your practice is a C-corporation, seek a business sales expert that can help connect you with all of the necessary advisors. Berkshire Business Sales and Acquisitions have a team of experts and we regularly pull in these professionals to insure that you have the best team helping you to transition your practice.


This should not be considered legal or tax advice and is being discussed only as one potential solution to hypothetical tax issues that arise from a sale. All tax compliance should be reviewed with your legal and tax team prior to implementation.

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