WHY IS BUSINESS VALUATION NECESSARY?
MEMBER OF THE NACVA ASSOCIATION Because ownership interests in privately held companies often represent a significant portion of one’s estate and/or portfolio. The value, or worth, of an interest in a privately held company, as opposed to stock in a public company, is usually unknown because there is no active market to sell or trade that interest from which to ascertain or approximate value. Value determinations are most commonly needed to calculate estate tax upon death, split up family assets in a divorce, and negotiate value in a purchase, sale or merger of a business enterprise. Other common reasons why a holder of an interest in a privately held company might require a business valuation include: • Adequacy of Life Insurance • Buy/Sell Agreements • Bankruptcy and Foreclosures • Charitable Contributions • Disruption of a Business • Dissenting Shareholder Actions • Eminent Domain • Employee Stock Ownership Plans (ESOPs) • Franchise Valuation or Evaluation • Gifting Programs • Gift
