What Is Your Business Worth?
If you are like many business owners, the vast majority of your wealth is tied up in your business. But do you really objectively know its dollar value? There are a number of tax, business, and financial planning reasons why you should know the value of your business, including:
- Estate valuation and liquidity analysis
- Buy-sell valuation
- Valuation of charitable gifts
- Divorce and prenuptial arrangements
- Ascertaining the worth of a business as loan collateral
- Stock option planning
- Lawsuits between partners
Do You Know the Fair Market Value of Your Business?
Valuation of a business is both an art and a science. It is an attempt to determine what is known as fair market value, meaning the value that a buyer and seller agree upon through an arm's-length transaction with neither being compelled to act and both having knowledge of the relevant facts.