For many business owners, a business appraisal or
"valuation" can furnish vital planning information and help mitigate
risk. Consider the following:
* Establishing a verifiable value for your business can
show whether assets have appreciated at a reasonable rate. If not, the firm's
strategy may need to be adjusted.
* Business valuations furnish documentation to support new
financing. Lenders need strong evidence that their loans are properly secured,
and a business appraisal can supply that evidence. An independent evaluation of
business assets also may encourage lenders to offer favorable interest rates.
* If you decide to sell the business, a valuation can help
you establish a reasonable selling price. Without a detailed and defensible
appraisal, owners sometimes entertain unreasonably low offers. On the other
hand, a valuation can keep owners from overpricing the firm and thus
discouraging potential buyers.
* What happens if one owner dies or otherwise leaves his
or her share of the business to others? In some cases, litigation follows. To
ensure that the remaining owners' interests are protected, the business needs
to be appraised beforehand.
* A valuation can also support proper estate planning. If
the estate is audited, the IRS is more likely to accept valuations that include
a clear and reasoned appraisal. In fact, if discounts are adequately supported
by an appraisal, estate taxes may be reduced.
* Business appraisals are also useful when it's time to
figure capital gains. For example, if you inherit a business from your father
and decide to sell it, the business can be valued as of the date of your
father's death. A good appraisal can help establish a supportable value for the
business and may result in lower capital gains taxes.
For assistance with valuing your business, contact our
office.
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