Accounting

How to sell the personal goodwill of advisory practices

Published

2 years ago

December 19, 2024

While all buyers look for a degree of figurative goodwill from advisory practice sellers, some financial advisors could reap tax savings by offering up that literal type of asset in the deal.

The personal goodwill assets of advisors seeking a succession transaction before retirement or making a breakaway move to a registered investment advisory firm aggregator from the wirehouses generates a long-term capital gain that is taxed at a rate up to 17 percentage points lower than ordinary income at the top bracket, two experts told Financial Planning. The possible tax strategy comes with caveats. But more prospective buyers and sellers are inquiring about the potential benefits, according to Corey Kupfer, who advises RIAs and other wealth management firms on M&A and succession as the founder of law firm Kupfer.

Sales of personal goodwill may help solve a problem that pops up for the founders of practices with one or more younger advisors who have built a base of clients without amassing any equity. Such sales may also eliminate the need for a traditional “12 months and a day” waiting period to complete a deal in order to ensure sellers get the long-term rate, Kupfer said.

“There’s some friction because you’re saying to an advisor that you have to wait over a year,” he said in an interview. “My sense is that it’s really only within the last two or three years that this has taken off, and the reason is that there’s a lot of competition for deals out there.”

Sellers should consult a tax expert early and often to consider every possible rule or implication from this form of asset transaction, according to Kupfer and Thomas Phelan, a partner with the Troutman Pepper Hamilton Sanders law firm who advises clients on M&A, reorganizations and cross-border deals.

Goodwill represents the difference between the total purchase price for a company in a deal and the market value of the firm’s assets minus liabilities. Within that umbrella, personal goodwill adds up to an especially important part of the purchase-price allocation for advisory practices that are “closely held corporations” with their value “very much targeted on the personal relationships of Jim Smith and his technical expertise,” Phelan noted in an interview.

In a personal transaction that distinguishes those assets from the goodwill of the corporation, the buyer “ends up in the same position” with “a deal that allows them to get a step up and a depreciable asset,” he said. The sellers, however, steer clear of paying taxes at both the corporate and individual levels in the personal goodwill transaction.

“If they’re operating out of a C-corporation, then I think the personal goodwill transaction seems potentially more appealing,” Phelan said. “The seller benefit is they get the capital gain and they don’t have to pay double tax. … You can strip a lot of value potentially out of the corporation, thus avoiding the double tax.”

The transactions require careful planning for a process that won’t be a fit for every possible seller out there, according to a guide compiled two years ago by attorneys Robert Greising and Travis Lovett of the Krieg DeVault law firm.

“A personal goodwill allocation approach should be raised early in the negotiation process,” they wrote. “This will safeguard against a challenge that allocation of personal goodwill was an afterthought, with the value negotiated by the parties assuming the goodwill was part of the business. The seller should obtain a third-party appraisal to establish the existence and the value of the personal goodwill. A separate agreement or, at a minimum, separate provisions of a purchase agreement should be used to evidence the sale of the personal goodwill separately from the corporate goodwill of the business. Could a personal goodwill allocation be right for your sale? Ultimately, answering this fact-sensitive question will benefit from the help of experienced professionals.”

Kupfer has worked on the buy or sell side of eight to 10 personal goodwill transactions over the past couple of years — an amount that is “not the majority, certainly” but a decent number considering that “people are still learning about it,” he said. Buyers interested in drawing wirehouse teams into the RIA channel in particular are reaching out to Kupfer to discuss them, with “one or two that haven’t been able to get comfortable,” others that are vetting the idea and “some of them I know are planning on using it,” he said.

In addition, he advised on one sale of an independent advisory practice with the personal goodwill structure on behalf of the sole owner of a firm who managed roughly 70% of the client base. Two other advisors respectively served another 10% and 20% of the customers, but they didn’t own any of the firm’s equity.

That dynamic created a “potential problem” from the fact that the firm would turn less valuable if those advisors left before the succession deal, or if the owner decided to share some of the deal proceeds with them in the form of ordinary income, Kupfer noted. So the owner sold 70% of the firm’s equity, then negotiated a personal goodwill transaction with the same buyer for the other 30% on behalf of the two other advisors.

“The only reason you need this is, when somebody doesn’t have an asset to sell because they don’t own the client list,” Kupfer said. “We were able to get them capital gains treatment, so, in the independent space, that’s the applicable scenario for personal goodwill.”

Breakaway advisors’ success over the past decade in carrying over 85% to 90% of their client bases in many cases when leaving wirehouses — despite their former firms’ nonsolicit agreements and frequent legal wrangling around those moves — has bolstered the appeal of personal goodwill deals. Comparable M&A transactions among captive insurance agents are fueling the stronger momentum for them as well, Kupfer noted.

In the “worst-case scenario,” the seller could wind up with an IRS finding that the deal proceeds were ordinary income and the buyer may wind up with “a failure to withhold claim” based on that compensation, he said. Still, he hasn’t seen the agency challenge any of the deals.

“If we had 10 or 20 years of history we could be more comfortable,” he said. “In the insurance space especially and in other spaces you do have that history of it being successful.”

Such nuances with personal goodwill deals point to the necessity of engaging with experts well in advance about topics like the terms of prior employment contracts, the structure of a deal and the resulting taxes, according to Phelan. He has “often seen it come up” when the owners of a closely held corporation find out about their future bills to Uncle Sam under a deal after signing the letter of intent with a buyer, he said.

“You want to talk to someone on the tax front early — ideally in the LOI process when it’s initially being negotiated,” Phelan said. “There’s an LOI, they’re buying the business and then they realize, ‘Oh shoot, we’re going to get hit with a double tax on this.'”

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

4 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.

Accounting

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

Published

5 days ago

July 20, 2026

Business Finance News

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

WASHINGTON — In a major escalation of cross-border trade friction, U.S. President Donald Trump has signed executive orders imposing new 50% tariffs on a wide selection of Canadian exports, citing discriminatory practices by Ottawa targeting American auto, dairy, and beverage industries.

The new duties, announced Monday, will take effect in 30 days. They target a broad spectrum of consumer and industrial goods—ranging from wine, liquor, and milk products to commercial cement, furniture, clothing, and hockey equipment.

Untested Legal Mechanism

To enact the sweeping measures, the administration invoked Section 338 of the Tariff Act of 1930—a rarely used legal provision allowing the executive branch to levy additional tariffs of up to 50% on foreign nations deemed to discriminate against U.S. commerce.

White House officials noted that Section 338 addresses trade discrimination rather than national security or economic emergencies. The move comes months after prior global emergency tariffs faced legal challenges in domestic courts, signaling Washington’s pivot toward alternate statutory authorities to maintain import duties.

Senior administration officials briefed reporters that the measure directly responds to Canadian provincial bans on U.S. alcohol, restrictions on American vehicle exports, and import quota disparities affecting U.S. dairy and cheese producers relative to third-party trading partners.

“While the administration continues to secure reciprocal trade agreements globally, Canada retaliated against efforts to protect domestic industry,” U.S. Trade Representative Jamieson Greer stated.

USMCA Impact and Carve-Outs

Significantly, the newly ordered 50% duties will apply to designated items even if they otherwise comply with the United States-Mexico-Canada Agreement (USMCA).

However, the administration confirmed key targeted exemptions:

Energy products (including oil and natural gas)
Potash and critical minerals
Fish and seafood
Goods already governed by sector-specific duties (such as existing steel and aluminum tariffs)

Administration representatives emphasized that the tariffs do not stem from recent disputes concerning drifting Canadian wildfire smoke, noting that policy options regarding environmental spillover remain under separate review.

Canadian Response and Market Reaction

Following the White House announcement, the Canadian dollar experienced a sharp decline against the U.S. dollar, falling approximately 0.4% during evening trading.

Canadian Prime Minister Mark Carney issued a statement emphasizing that Canada’s earlier counter-duties had merely matched previous U.S. trade actions. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney stated, pointing to detailed proposals Ottawa submitted to modernize the USMCA framework.

Ontario Premier Doug Ford took a firmer stance, urging a “dollar-for-dollar” reciprocal response if the measures go into effect on August 19.

With a 30-day implementation window before the duties officially lock in, industry associations and trade groups on both sides of the border are calling for urgent bilateral negotiations to avert further supply chain disruption across North America.

Accounting

Automated Continuous Auditing: Transforming Compliance and Real-Time Financial Oversight

Published

5 days ago

July 20, 2026

Business Finance News

Transforming Compliance and Real-Time Financial Oversight

The traditional accounting paradigm—defined by periodic monthly closures and post-hoc annual audits—is rapidly giving way to continuous, automated financial oversight. As of July 2026, forward-thinking accounting practices and multinational corporate finance departments are leveraging continuous auditing systems powered by advanced machine learning models. These systems monitor operational transactions in real time, shifting audit methodologies from sample-based post-analysis to absolute, 100% transaction-level verification.

The operational advantages of continuous auditing are transformative. Standard auditing procedures historically relied on statistical sampling, which, despite rigorous methodology, inherently left gaps where anomalies or fraudulent transactions could go undetected for months. Modern continuous auditing platforms integrate directly with enterprise resource planning (ERP) databases, instantly cross-referencing purchase orders, invoices, bank feeds, and tax records. Any deviation from established control parameters or unusual transaction behavior triggers immediate flags for internal audit teams, dramatically reducing detection lag from quarters to seconds.

Beyond fraud prevention, continuous auditing fundamentally alters internal reporting and decision-making. Executive leadership no longer has to wait weeks after the close of a quarter to evaluate precise financial standing; real-time verified ledger data provides an uninterrupted view of operating margins, tax liabilities, and cash flow dynamics. This real-time visibility enables corporate controllers to adjust capital allocation strategies dynamically, mitigating liquidity constraints and capitalizing on emerging commercial opportunities far more efficiently than competitors bound to legacy reporting cycles.

However, implementing continuous auditing requires accounting professionals to acquire new analytical capabilities. The role of the auditor is evolving from manual data reconciliation toward system validation, algorithmic model governance, and strategic risk interpretation. Accounting firms and corporate finance departments must invest in continuous technical education, ensuring that audit staff possess the data engineering skills necessary to design, maintain, and evaluate complex automated compliance systems.