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Business Interests Often Represent a Significant Asset

Business valuations are performed because ownership interests in privately held companies often represent a significant portion of one’s estate and/or portfolio. The value, or worth of an interest in a privately held company, as opposed to stock in a public company, is usually unknown because there is no active market to sell or trade that interest from which to ascertain or approximate a value. Value determinations are most commonly needed to calculate estate tax upon death, split up family assets in a divorce, or negotiate value in a purchase, sale, or merger of a business enterprise. Besides these, there are many other reasons why a holder of an interest in a privately held company might require a business valuation. Valuations are performed to determine company or stock value for:

• Actions in Eminent Domain
• Buy/Sell Agreements
• Charitable Contributions
• Damages for Disruption of a Business
• Dissenting Shareholder Actions
• Estate Tax Planning
• Family Limited Partnerships
• Gifting Programs and Gift Taxes
• Life Insurance
• Marital Dissolution
• Partner Disputes and Split-Ups
• Purchase, Sale, Merger of a Business
• Split-Ups/Spin-Offs of a Division or Subsidiary
• Succession/Exit Planning
• A Value-Added Service

Possibly one of the best reason for obtaining a business valuation is to use it as a management tool. A prime objective of every business enterprise, large or small, is to improve and maximize its value to the owners. This is necessary business requirement to justify the investment of time and, more particularly, capital. A properly prepared business valuation provides management with insightful information that helps identify company strengths and weaknesses that affect value, allowing management to more effectively focus its energies in places that really count. A business valuation prepared periodically, also serves as a measurement tool that helps owners evaluate overall progress towards goals and management effectiveness