Goodwill – Your most important Asset
Posted by Larry Boychuk on 28 July 2014 02:01 PM
Goodwill – Your most important Asset
Goodwill is defined as the intangible assets in your business specifically related to your connections through your client list and your business reputation.
If you search the Internet for the word “Goodwill “you will find a multitude of Tax planning articles. How Goodwill affects your accounting and your succession plans is amply written about online. Every small business person should be aware of the goodwill implications to your tax planning; however, you will usually hire a knowledgeable accountant when the time comes that you need to sell your client list. As a business operator myself, I know that I can’t plan to build up, nor protect myself from those types of transactions when I am first starting my business.
But what about the other part of your Goodwill…. your reputation? Your reputation will depend on your business name and thankfully you can plan to build and protect this key component.
So how do you plan for a bountiful Goodwill?
1) Build a Great Business Name
2) Protect your name
These two simple concepts; Build and Protect; are all you will need to ensure your business’ Goodwill.
So first, let’s discuss how to build your Goodwill. By building a great business name you will be more memorable in the marketplace and better able to attract and retain clients. Make sure to watch our online video guide on How to Build a Great Business Name for more details.
The video will explain that every great business name needs to have a Distinctive element and a Descriptive element. A Distinctive element is the unique part of your name that will set you apart from the crowd. Your Descriptive element will tell the marketplace what you do.
If you are to build your reputation you will need to start with a great business name. XYZ Services won’t work. Instead, you need to be Facebook, Inc. or Telus Communications Inc.
Word of Mouth advertising is the cornerstone of all small businesses and having a great business name makes it easier for everyone to remember you … and to refer you.
Once you have built a great business name you will need to protect it. Protecting your name rights should be a part of your business planning as it will affect what type of business you form. Name right protection in Canada follows the hierarchy below:
Often, businesses Trademark their distinctive element, such as Facebook™ or Telus™ to give them ultimate name protection for that word in Canada. A trademark can be seen as a tangible Goodwill asset because you have ownership of your name and is a great way to protect your reputation. Trademarking isn’t for every small business though. Registering a Trademark will only become necessary if it is part of your business plan to have complete and total rights to your name in Canada.
Incorporating Federally will give you better name protection without having to register a Trademark. You will be protected from any other Federal or Provincial company to start up with a confusingly similar business name to yours.
Most businesspeople start up Provincial Corporations. It gives a good amount of name protection and will be able to protect your strong business name. You will be protected from any new entrant to the marketplace from incorporating in your Province with a confusingly similar business name to yours.
Unfortunately, Trade Name or Sole Proprietorship registrations have no name rights. You are not guaranteed that another trade name, provincial, or Federal incorporation will register with a confusingly similar business name to yours.
Now you have some tools to help you build and protect your business’ Goodwill. We hope that you will be able to reap the rewards of your hard work on planning for, building and protecting your Goodwill.
Use our navigation links to continue with your NUANS® or Name reservation reports or to incorporate.