Why retiring partner is entitled to goodwill of the firm?
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Goodwill is an reputation of the business. It is the intangible asset of the firm which is earned by the partners of the firm. When a partner retire from a firm, he leaves behind the reputation i. e goodwill of the firm that was earned by his efforts like with their hardworking, sincerity, dedication, devotion etc etc. It signify the future earning capacity of the firm. Therefore outgoing partners gets compensation from the firm in the form of goodwill. In other words, the past performance and reputation of the retiring partner will be shared by the remaining partners should compensate the retiring partner by entitled him, a share of their reputation i e goodwill.
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