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IRS Business Valuation Factors

IRS Business Valuation Factors

The IRS has eight factors it will look for in the valuation of a closely held business:

  1. The nature and history of the business.
  2. The economic outlook in general and the outlook for the industry in particular.
  3. Book value (assets minus liabilities) and financial condition.
  4. Earning capacity.
  5. Dividend-paying capacity.
  6. Goodwill or other intangible value.
  7. Prior sales of stock of the operation.
  8. Comparison to similar, publicly traded companies.

The IRS has maintained that no fixed formula is universally applicable, except for formulas set out in a properly designed buy-sell agreement that are intended to approximate fair market value.

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Last Updated: 12/14/2017