Business Valuation
As a business owner, there is an excellent chance that at some point you are going to need, perhaps even want, a business valuation. There are different levels of valuations that you can obtain, from verbal reports to full conclusions of value that consider all the valuation methods, including the asset approach, the market approach and the income approach. There are a number of reasons to obtain a valuation from a Certified Valuation Analyst.
Tax Related Issues – It is prudent to obtain a certified valuation, following Revenue Ruling 59-60, for submission to the Internal Revenue Service (IRS) with the Estate or Gift tax return. The IRS has very stringent regulations on how valuations are to be performed and what elements are to be included. An independent valuation substantiates the tax calculation for the IRS and minimizes your risk in the event of an examination.
Other important tax areas include transfers of ownership and C to S corporation conversions. For companies holding appreciated assets, it is often most desirable to elect to convert to an S corporation for flow-through tax purposes. Upon conversion, it is important to have a certified valuation of the business prepared. If the business or its assets are sold prior to the ten year holding period, there is a tax due on the built-in gain of value from the date of conversion. The certified valuation will be used to substantiate the tax calculation for the IRS.
Legal & Litigation Issues – A business valuation is often needed to establish economic damages in commercial litigation proceedings, to determine equitable distributions in shareholder disputes and to facilitate an equitable distribution settlement for divorce. Some of the more common legal reasons for obtaining certified valuations include marital dissolutions, partnership dissolutions, shareholder disputes, buy-sell agreements and eminent domain issues.
Mergers & Acquisitions - Determining the value of your business is the first step in the process of selling the business. A certified valuation will allow you to respond to potential buyer concerns by analyzing your company’s value and risk drivers. It will identify the sources of value and the areas of the business that can be improved. Knowing the fair market value of your business, backed up with an independent valuation, will prepare you to be a better negotiator.
Business Financing – Whether you decide to look at traditional lending institutions or venture capital (VC) to help finance your business, an independent business valuation will often be required before approval of your financing is considered.
Additional Valuation Purposes – There are many additional valuation purposes including Fair Value Reporting and Disclosures, Intellectual Property Valuation, Insurance Purposes and Foreclosures.
If you are a small business owner, you should be concerned with the cost/benefit ratio of having an expert valuation prepared by a Certified Valuation Analyst. It really comes down to the old adage, “you get what you pay for.” It is invaluable to have a valuation that stands up under scrutiny, is defensible in litigation and mediation, and provides you will the key information you need to make sound business decisions.
We provide business valuation services to organizations located in Massachusetts and New Hampshire, with the capability to serve businesses throughout New England.
industries we serve
978-452-2500
info@anstisscpa.com