Value determinations are most commonly needed to calculate estate value upon death, split up of family assets in a divorce, or to 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. The more common ones are:

• Adequacy of life insurance
• Charitable contributions
• Dissenting shareholder actions
• Eminent domain
• Gift taxes
• Obtaining financing
• Split ups/Spin-offs
• Buy/Sell agreements
• Disruption of a business
• Employee Stock Ownership Plans (ESOPs)
• Gifting program
• Initial Public Offerings (IPOs)
• Partner disputes
• Succession planning

Many business owners believe the value of their business is net profit, or gross sales, multiplied by some industry rule of thumb.This is simply not the case. In fact, the application of an industry rule of thumb formula could result in a value determination that differs greatly from the actual value that could be determined by a qualified business valuation professional.

If you have any business valuation inquiries, please contact
John A. Wheeler, CPA, CVA for additional information.