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Discuss valuation problems with closely held businesses

Aug 19th, 2015

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Valuation of the closely-held, family business is often an estate planning issue but valuation issues can arise in a number of legal settings, including shareholder litigation, divorce and legal separation, contributions to qualified retirement plans including transfers to charitable and non-charitable uni-trusts, estate partitions and may others. However issues emerge on the way valuation of the business is conducted considering the number of  economic constrains like market.  Quite a number of problems can arise in the process of valuation such as the following

1. Minority Interest. In most instances, particularly in community property states, the interest to be valued is a minority interest.

2. Poor market value.Methodologies that compare the closely-held, family business to comparable public traded companies require adjustment to reflect the fact that there is no ready market for the shares of a closely-held business.

3.Absence of Key Person. The death of a  main  person, particularly the founding entrepreneur or the original proprietor, can have a negative impact on value, particularly on  life insurance .

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Aug 19th, 2015

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