Are you looking to place a worth on your business? A business valuation can be the best way to come up with the worth for your company. It is used to determine the businesses worth at a specific moment in time. It also helps others determine how much they may be willing to pay for a business. Not only can it be used to estimate selling price, but also as a way to assist in legal disputes. Courts often order business owners to have a valuation if there is a question of estate, gift taxation, establish partner ownership value or divorce.
Business Sales
When selling a business, you want to make sure that you are getting the money that your business is worth. Owners tend to overestimate the worth of their business, and this is simply because it is worth a lot to them. Having a valuation will assist the seller in getting an idea what the business is worth. This process will provide you with the most realistic value of your company for negotiation purposes.
Partnership
Whether you are changing business partners or bringing someone new in, it is very important that you understand various methods of valuation before changing partnership. Shareholder buyouts is a common reason business owners have their company evaluated.
Estate & Gift tax
Legally you may have to report any type of inherited goods. This would include a business. In this case, you would need to know its true worth to report to the IRS. Valuation is the process you may legally have to take to complete estate and gift tax reporting. Don’t over estimate or under estimate the value of your inheritance or gift, this could pose serious penalties or financial obligations from state and federal tax authorities.
Buy-Sell
You will find that some companies will enter into a legally binding buy-sell agreement. Before this can be signed, you should know the true worth of the business to ensure that neither party over or under pays. Future disputes can arise for unseen values or lack thereof, so ensuring a neutral 3rd party evaluates all facets of the business is key to minimizing disputes down the road.
Divorce
What about divorce? Remember all assets will have to be considered when going through a divorce. Even business assets, so a judge will typically order a business valuation to make sure he or she can consider the split correctly. Whether you are the business owner or the non-owning spouse, ensuring that all financials of all parties are considered when dividing assets is key to ensuring a fair division.
Corporate Litigation
Corporate litigation is a long process, and it is vital that everything is in place. To protect assets, shareholders of the company will want to know the full value of what’s viable as well as be fully informed of the assets and outstanding liabilities to get a full view of the value of the company and its assets.
No matter the reasons why you are engaging in a business valuation, you want to make sure that you hire a professional that is knowledgeable about the process. This will ensure you get the reasonable worth of your company. These types of evaluations are handled by an individual who is properly accredited. Be cautious when hiring just anyone to do your valuation, as you want to make sure it is done correctly. Ask for certification and referrals. You have a lot at stake, as you do not want your company’s worth being estimated too high or low as it could cost you money in the long run.
A full-service Certified Public Accounting Firm located in Denver, Shuster & Company PC provides quality, personalized financial advice and guidance to individuals, businesses and the legal community. We offer an extensive range of services, with emphasis in forensic accounting, business valuation, and litigation support.