Business Valuations

It has long been recognized that ownership interests in privately held companies often represent a significant portion of one's estate and/or portfolio. The value of an interest in a privately held company regardless of the size, as opposed to stock in a public company, is usually unknown because there is no active market to sell or trade that interest. Without a benchmark value for like type companies, there is not a ready source from which to ascertain the approximate value.

Value determinations are most commonly needed to calculate estate tax upon death, gifts of interest in an ongoing business to family members, division of family assets in a divorce action and negotiate value in a purchase, sale or merger of a business enterprise. There are many other reasons why a holder of an interest in a privately held company might require a business valuation, including:

• Life Insurance Adequacy
• Buy/Sell Agreements
• Charitable Contributions
• Disruption of a Business
• Gift and Estate Taxes
• Obtaining Financing
• Partner Disputes
• Dissenting Shareholder Actions
• Succession Planning
• Bankruptcy and Foreclosures

One of the best reasons for obtaining a business valuation is to use it as a management tool. The main objective for any business enterprise is to improve and maximize its value to the owners. A properly prepared business valuation provides management with the information to help identify company strengths and weaknesses. Those strengths and weaknesses affect value. When properly identified, management can effectively focus their energies and resources in the areas that will yield the best results. A periodic business valuation also serves as a measurement tool to help owners assess overall success and management effectiveness.