I have a client who started a business in 2008. She is selling this business in 2011.
I need to know how to figure the cost basis of this business. I have the furniture, equipment improvement figures and inventory, but I don't know how to calculate the "Goodwill", the value of the owners time to create the business and "the covenant not to compete". The business is "exercise classes, with some retail clothing and a small
2008 Gross income
= 163,851, profit 8,197.
2009 Gross income= 194,301, profit -485.
2010 Gross income= 225,783, profit-3,581.
Also I know the buyer needs to pay sales tax
on the furniture & equipment, but I'm not sure if sales tax must be paid on the existing inventory, which amounts to approx. $20,000. Thank You, XXXXX XXXXX