Asset Allocation

[JimG]

For those of you who have bought and sold previously, what are the advantages and/or disadvantages to the allocation of the purchased (or sold) assets among the following asset classes: Trade Name, Goodwill, Furniture Fixtures & Equipment, Covenant Not to Compete.

Is there a preferred approach or allocation? Does one approach to allocation favor the buyer (or seller) vs. another approach? Or does it not really matter?

Thanks in advance for your advice/replies.

[William]

As a buyer you want as much in equipment as possible so that you can write it off sooner. As a seller it depends on your basis and how long you have held the asset. Over a year it is capital gains, under a year and it is ordinary income.

Consult an accountant. I would say that the asset allocation is as important as any other aspect of the negotiation, and perhaps more so than some other details that get alot of attention.

Good luck!

[ericnyc]

Dont forget consulting contracts where you allocate portion of the purchase price to having old owner train you. Such expense is fully deductible in year one.