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Asked by Chittaranjan Last Modified
Answer 
Due to admission of a new partner, old partners have to share their part in their value of goodwill created till date. Hence they (old) partners wants contribution from new partner for their compromise in the value of goodwill for new partner. New partner would compensate to old partners in their sacrificing ratio.
read lessThe old partners have spent their time and effort and have contributed to the growth of the business. They have built a brand and loyalty among customers. This intangible reputation which has been established is termed as 'Goodwill'. It would be unfair of the new partner to enjoy all the benefits of the already nurtured brand and therefore they pay an amount as their contribution towards the firm's goodwill.
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Deepika Agrawal
Interested to teach to class 1 to 5 , 6 to 10 , 11&12
It is so because the firm into wich he is entrying already has some goodwill in the market. And also when he is admitted into the partnership the existing partners sacrifice some portion of their profits in favour of the new admitted partner so in return he has to bring some amount into the busines as premium for goodwill to give to extising partners.
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New partner shuold pay for Goodwill because when business was started existing partner invest their money and time to start that business. May be at starting, business was not profitable. But they continue with their efforts to make it profitable. So they take Goodwill in return of their efforts in past.
And one more thing, from day one new partner will have right in profit. If he starts his own then it would take time to earn profit. That's why he has to pay amount to existing partner.
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A firm always has some established goodwill in the market and the existing partners contribute towards it, when a new partner joins in the existing partners contribute their some part of profit to the newcomer therefore the new partner is liable to contribute goodwill on his admission.
Hope this helps you
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The goodwill existing for the business at the time of admission of new partner has been built by old partners. Thus new partner acquire the right to share the future profits and this include the capability of the partnership to general same or more profits. Thus the new partner must acquire this right by contributing towards goodwill in his profit sharing ratio.
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