Reasons for a Business Valuation
Purchasing a Business
The decision to purchase a business can be one of the most important economic decisions a person can make. It is often a commitment of both money and personal effort – a decision once made that may not readily be undone. Prior to taking the step of purchasing a business an independent, professional analysis of the benefits from the business should be made. Agin and Agin can assist you in analyzing the value of the business, considering your desires, and risk tolerance.
Selling a Business
When a decision is made to sell your business you should have a realistic appraisal of its value. Often, potential purchasers are trying to get a business as inexpensively as possible. A business valuation can help in pointing out the strengths of your business and look at value from a variety of ways, including the purchase by a strategic purchaser for whom the business may be worth more than to the average investor. A business valuation can also point out your business weaknesses and allow you to address them prior to marketing your business and enabling you to realize additional value for your business.
Shareholder Relationships
It is an axiom that every business partnership will end, either through death, retirement of one of the owners or dissolution of the relationship due to disputes. The time to address the issue of how the business interest of one or more of the owners or partners will be valued is best done before the relationship begins. Of course business valuations speak to value at a point in time. A business valuation can provide a formula or methodology which can be applied at some future date should the need arise.
Shareholder Disputes
Unfortunately disputes arise among shareholders or partners which can best be resolved through the dissolution of the relationship. A business valuation, by an independent business appraiser, can assist in the resolution of these disputes by providing a realistic value to the business, and can assist you and your advisors with a structure to terminate the business relationship that exists.
Domestic Relations
Often business interests represent a significant portion of a marital estate. Determining the value of the business may be crucial in determining the division of marital assets. Where a spouse had the business interest prior to marriage there may be a claim that such business interest is a non marital asset. However the increase in the value of the business during the course of the marriage may be considered a marital asset and subject to division. In almost every instance where a business interest exists a business valuation should be considered.
Estate and Succession Planning
At the death of a business owner, where an estate tax return will be filed, it is necessary to have a valuation of the business interest. When estate planning is being done, and decisions are being made as to disposition of assets as death and liquidity needs, a business valuation may be essential.
If the business is to be transferred prior to death a business valuation may be necessary for the filing of gift tax returns.
Where a business is being transferred to the next generation during the lifetime of the business owner a business valuation is useful in determining how other assets will be divided, either during your lifetime or at your death.
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