Company owners and shareholders seek independent business valuations at various times for various reasons. Here are twenty situations in which you may want a business valuation:
- An owner has passed away and a valuation is required to settle the estate per IRS regulations.
- An owner is getting divorced and needs to have the company or their fractional interest valued to settle the marital estate.
- An owner wants to gift shares to his or her heirs.
- Business acquisition financing.
- Owners need an independent opinion of value to comply with provisions of the company’s shareholder agreement.
- A management buyout – either on behalf of the current owners, or management or both.
- You are considering selling the company, merging with another company, or acquiring a company – an objective opinion of value can play an important role in setting expectations and having a successful negotiation.
- One or more owners are developing a retirement plan and need to establish a preliminary value of their shares.
- Your business is the largest asset in your investment portfolio – understanding its true value is essential to any good personal financial plan.
- The owner(s) wants to enhance business value – a current valuation establishes a baseline and identifies opportunities for value enhancement.
- Owners are creating a buy-sell agreement or purchasing life insurance.
- Owners want to part ways and need an independent valuation to determine the share price, because they can’t agree on price or their buy-sell agreement requires it.
- The company is recapitalizing.
- The company is converting from a C corporation to an S corporation.
- The company (public or private) has acquired another company and needs to allocate the purchase price to all the tangible and intangible assets for financial reporting purposes in accordance with ASC 805.
- The company has an employee stock ownership plan (ESOP) or incentive stock options.
- The company has goodwill on its balance sheet and needs to test it for impairment in accordance with Generally Accepted Accounting Principles (GAAP).
- The company has stock-based compensation and needs to comply with IRC 409A and ASC 718.
- The court, or one or more owners needs an independent valuation in support of litigation, or to avoid litigation.
- The owners decide a capital call is required and one of the owners has become insolvent, triggering a buy-sell.
Click here for more information on the use of business valuations in different situations.
Contact one of Exit Strategies’ business valuation experts to discuss a possible business valuation need, confidentially and at no cost.