Obtaining a business valuation from a Certified Valuation Analyst is more accepted by the IRS and will stand up better in court. If you don’t have an accurate valuation, there could be business and tax consequences.
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Some of the reasons a business person would want a business valuation performed is:
- If they're buying or selling a business.
- If they are having shareholder dispute.
- If there are gifts being made to a family member of a portion of their business.
- If an unfortunate event happens that one of your shareholders passes away, you'd have to have a valuation done for estate tax purposes.
- And if you're going through a divorce, both sides usually would require a valuation of your business.
A CVA is a certified valuation analyst. And there's a lot of training and testing to obtain that title. It’s more recognized by the IRS than if you would just do what they call a "back of a napkin" valuation. And if you go to court – and a lot of times with divorce proceedings, you'd have to court for either side – the opposing counsel could eat you alive if you're not qualified or a CVA.
At Concannon Miller, we work in a team approach when we do our business valuations. And we've done thousands of valuations over the years. All types from restaurants to manufacturing locations. We have the experience and the credibility to produce a very quality product.
If you don't have a qualified person like a CVA doing your business valuation, first of all, you may be under or overstating the value. And that could hurt you on both sides. If you're undervaluing and you're selling your business, you're not going get what it's worth.
If you're overvaluing, you might be reporting on a gift tax return a much higher value, which in the long run if your estate is worth over $5 million and you pass away, then you're going to have to pay – or your descendants will have to pay – a lot more in estate taxes.