April 2024
In some cases there are laws or regulations that require an annual valuation of a business or business interest. But there are other situations that may make an annual valuation desirable. One such situation is where there are a large number of stockholders or other business interest holders. This is common in the banking industry. An annual valuation provides a benchmark value for transactions among stockholders/interest holders and between the business itself and stockholders/interest holders. It also provides a benchmark for valuing business interests for gift and estate tax purposes and for marital dissolution as well as for other purposes. Also, it isn’t unusual for a business owner to have an annual valuation of the business to measure business performance from year-to-year.
A business valuation not only provides a value conclusion, but also provides an analysis of the economy and industry outlook, an analysis of five plus years of financial data and the method of valuation. These analyses can be helpful in running a business from year-to-year. An annual valuation of a business helps a business owner focus on the variables that increase the value of the business.
Lastly, an annual valuation is usually considerably less expensive than a single report, on a per report basis, allowing a policy of annual business valuations to be more cost-effective.
Relevant Court Cases
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Appvion, Inc., et al. v. Douglas P. Buth, et al.,
U.S. Court of Appeals for the Seventh Circuit,
No. 23-1073,
decided April 23, 2024
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Adriana Granada v. Israel Rojas,
Court of Appeals of Ohio Eighth Appellate District
County of Cuyahoga, No. 112622,
decided April 4, 2024
Recent Business Valuation Articles
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“The Valuation of Private Companies,”
by Srinivasan Selvam and Timothy Whittaker,
posted April 16, 2024
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“Equity Risk
Premiums (ERP): Determinants,
Estimation, and Implications - The
2024 Edition,”
by Aswath Damodaran,
updated March 5, 2024
Recent Engagements
- Valuation of partnership interests of
a mostly real estate partnership on a
minority interest basis for
redemption purposes.
- Valuation of the non-voting
common stock of a niche fuel
service provider on a
minority interest basis for
gift tax reporting purposes.
- Valuation of member interests in
a specialty contracting firm on
a minority interest basis for
issuance/income tax reporting
purposes.
- Valuation of the common stock of
an industrial equipment manufacturer
on a minority interest basis for
generation-skipping transfer
tax exemption purposes.
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