valuation - Linkenheimer LLP CPAs & Advisors

5 Valuation Terms That Every Business Owner Should Know

As a business owner, you’ll likely need to have your company appraised at some point. An appraisal is essential in the event of a business sale, merger or acquisition. It’s also important when creating or updating a buy-sell agreement or doing estate planning. You can even use a business valuation to help kickstart or support strategic planning.

A good way to prepare for the appraisal process, or just maintain a clear big-picture view of your company, is to learn some basic valuation terminology. Here are five terms you should know:

1. Fair market value. This is a term you may associate with selling a car, but it applies to businesses — and their respective assets — as well. In a valuation context, “fair market value” has a long definition:

The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s […]

By Linkenheimer LLP|2023-04-12T16:04:20+00:00April 12th, 2023|business|0 Comments

Prepare for Valuation Issues in Your Buy-Sell Agreement

Every business with more than one owner needs a buy-sell agreement to handle both expected and unexpected ownership changes. When creating or updating yours, be sure you’re prepared for the valuation issues that will come into play.

Issues, what issues?

Emotions tend to run high when owners face a “triggering event” that activates the buy-sell. Such events include the death of an owner, the divorce of married owners or an owner dispute.

The departing owner (or his or her estate) suddenly is in the position of a seller who wants to maximize buyout proceeds. The buyer’s role is played by either the other owners or the business itself — and it’s in the buyer’s financial interest to pay as little as possible. A comprehensive buy-sell agreement takes away the guesswork and helps ensure that all parties are treated equitably.

Some owners decide to have the business valued annually to minimize surprises when a buyout occurs. This is often preferable to using a static valuation formula in the buy-sell agreement, because the value of the interest is likely to change as the business grows and market conditions evolve.

What are our protocols?

At minimum, the buy-sell agreement needs to prescribe […]

By Linkenheimer LLP|2020-09-03T20:04:29+00:00September 13th, 2018|business, tax planning|0 Comments

Understanding the Value of Next-Gen Cost Segregation Studies

Cost segregation studies involve identifying personal property assets with shorter tax depreciation lives (i.e. 5 or 7 years) that have been grouped with real property assets (typically 39 year) and separating these out for tax depreciation purposes in order to accelerate depreciation deductions. The thought of cost segregation for real estate can be an overwhelming concept for most taxpayers, but thanks to the newly revised tangible property regulations that were passed in 2014, these next-generation cost segregation studies have become an even more powerful tool for real property owners. These detailed studies allow us to reduce tax liabilities for our clients and in turn, put more dollars back into our clients’ pockets and businesses, further stimulating growth and peace of mind. So while the value of these studies is unmistakably positive, understanding the details of it are a bit more complex. Heidi Henderson from Engineered Tax Services, published a detailed and thorough article on understanding and realizing the value of these next-gen studies. To view the complete article click here. As a general rule of thumb, if you own real property with a value greater than $750,000, it is very likely that you would […]

By Linkenheimer LLP|2020-09-03T20:05:31+00:00February 24th, 2015|cost segregation|0 Comments