What Are Intangible Assets? How They Factor Into a Business Valuation

Assets with no physical form but that are still identifiable — intellectual property, goodwill, and similar items.

Why it matters: In a Main Street deal, intangible assets — especially goodwill — often make up a large share of the purchase price, even though they're the hardest part of the deal to point to or inspect. A buyer needs to understand what they're actually paying for: is it a transferable brand, a customer list, proprietary processes, a lease with below-market terms, or largely the seller's personal reputation and relationships that may not transfer at all? That distinction affects both price and how the deal gets structured (and taxed) — buyers and sellers often prefer different allocations between tangible and intangible assets for their own tax reasons, which is why purchase price allocation becomes its own negotiation late in a deal. Consult a tax professional before finalizing any allocation, since the tax treatment can vary and the rules can change.

Example: A design agency sells for $700,000, of which $150,000 is FF&E (computers, office furniture) and $550,000 is goodwill — largely built on the firm's reputation and repeat clients. A buyer should ask how much of that goodwill is tied to the outgoing owner personally versus the brand and team as a whole.

Intangible Asset Types

	Tangible Assets	Intellectual Property	Goodwill	Other Intangibles
Can be sold separately	Yes	Yes	No	Varies
Useful life	Finite	Finite	Indefinite	Varies
Value method	Depreciation	Amortization	Not amortized	Amortization

Note: accounts receivable have no physical form either, but most treat them as tangible since they convert to cash within a year.

Related terms: Business Appraisal, Furniture, Fixtures and Equipment (FF&E), Multiple, Depreciation