Why would you consider keeping your business valuation current? You might be able to think of one or two reasons, but there are plenty:
• What if something calamitous were to happen to you as the business owner? It obviously would mean a major change. With an up-to-date business valuation, your family will have a much easier time dealing with the potential sale or dissolution of your business.
• You never know when an opportunity to sell or merge with another company will come your way. You may have to decide quickly. With a current business valuation, you’ll be able to take advantage of any juicy circumstances that may occur.
• You may want to take on a new partner or LLC member. You’ll need to know the value of your business to determine the buy-in price. The new owner will also want to see the valuation — to decide if the buy-in price is reasonable.
• Do you have an exit strategy? Are you reaching retirement age? You’ll need to know the value of your business to construct a plan. It could mean a restructuring. A valuation can help determine the strategy.
• You may be thinking about expanding or building a new facility. The bank for sure will want a valuation of your business for financing purposes. With your valuation, you can streamline the process, more easily obtaining a lending decision.
• What if your partners or shareholders want out? You’ll need the valuation to figure out how to divide your business. With the information on hand, an unpleasant situation can be less stressful.
• With a valuation, you’ll have a benchmark to compare the value of your business before and after a business disaster occurs. After all, you can’t go back in time to value your business as of a previous date — not with the utmost accuracy.
• Divorce or other family issues may occur. With an up-to-date business valuation, you can help plan how to deal with personal emergencies and unpleasant events. Divorce? The court will almost certainly want to establish the value of your business as an asset of the marriage, but most likely, the judge will appoint a neutral third party to conduct the valuation. However, you may be able to avoid court entirely if you know the value of your business as you and your spouse begin discussions and negotiations to settle matters on your own.
• You may want to determine the annual per share value of an employee stock ownership plan (ESOP).
If you have questions, contact an MCB Advisor at 703-218-3600 or click here. To review our business planning articles, click here. To review our tax news articles, click here. To learn more about MCB’s tax practice and our tax experts, click here.