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Business Valuation Articles

 

How to Value “Profits Interests” in LLCs

How to Value “Profits Interests” in LLCs

Posted by William P. Allen on May 12, 2020

Limited liability companies (LLCs) sometimes offer a unique form of equity-based compensation known as “profits interests,”  but these awards don’t convey the full rights of ownership. It’s important to understand the specific terms of an award and how a unit’s terms and conditions affect the method of valuation.

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From Fraud to Pandemic: How Valuators Handle Subsequent Events

From Fraud to Pandemic: How Valuators Handle Subsequent Events

Posted by Douglas Sosnowski on May 04, 2020

When valuing a business, experts must put themselves in the shoes of hypothetical buyers and sellers and consider only what was “known or knowable” on the valuation date. In a recent U.S. District Court case, the estate filed a tax return based on the exchange price of bank stock before the company disclosed a devastating fraud scam.

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Taxpayer Proves IRS Valuation Was Arbitrary and Excessive

Taxpayer Proves IRS Valuation Was Arbitrary and Excessive

Posted by William P. Allen on May 04, 2020

The U.S. Tax Court recently ruled that a tax-free merger of two family-owned manufacturing businesses resulted in a taxable gift to the sons because the parents undervalued their company. On appeal, Cavallaro was remanded to the court to allow the taxpayers to prove that the tax deficiency was based on an “arbitrary and excessive” valuation performed by the IRS expert.

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Valuing “Synergies” in M&A

Valuing “Synergies” in M&A

Posted by Douglas Sosnowski on April 28, 2020

In mergers and acquisitions (M&As), it’s often said that the combined entity is more valuable than the sum of its parts. The reason is related to a concept known as “synergies,” which are benefits to a specific strategic buyer.

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Stephanos v. Stephanos - Personal vs. Enterprise Goodwill in Divorce

Stephanos v. Stephanos - Personal vs. Enterprise Goodwill in Divorce

Posted by Louis Cercone, Jr. on April 14, 2020

The treatment of business goodwill in divorce cases varies from state to state. Courts in more than half of the states, including Florida, make an important distinction between personal and enterprise goodwill.

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Profits Interest Awards Require Business Valuation Expertise

Profits Interest Awards Require Business Valuation Expertise

Posted by Douglas Sosnowski on March 02, 2020

Equity-based compensation can help businesses attract and retain qualified employees. Limited liability companies (LLCs) can issue a special kind of equity-based compensation known as a “profits interest,” however, a business valuation professional is essential to determine the value of these ownership interests for tax and accounting purposes.

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Should Subsequent Events Be Factored into the Valuation Equation?

Should Subsequent Events Be Factored into the Valuation Equation?

Posted by William P. Allen on February 18, 2020

When valuing a business interest for federal transfer tax purposes, it's usually taboo to consider events that happen after the valuation date. But there are two important exceptions to this general rule: 1) subsequent events that are “reasonably foreseeable,” and 2) unforeseeable subsequent events that provide an “indication” of value.

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How Financial Experts Can Help in Divorce

How Financial Experts Can Help in Divorce

Posted by Louis Cercone, Jr. on February 04, 2020

Divorce involves complex financial issues. A financial professional can help the parties resolve such matters as divvying up a marital estate and valuing private business interests. 

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Six Common Valuation Pitfalls in Shareholders’ Agreements

Six Common Valuation Pitfalls in Shareholders’ Agreements

Posted by William P. Allen on January 21, 2020

The purpose of a buy-sell agreement is to ensure a smooth transfer of ownership and avoid disputes over the buyout price when an owner dies or leaves the business.

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Estate of Jones: Valuing Gifts of LP Interests in Income-Producing Real Estate

Estate of Jones: Valuing Gifts of LP Interests in Income-Producing Real Estate

Posted by Douglas Sosnowski on January 07, 2020

The U.S. Tax Court addressed several key business valuation issues in a recent gift tax case.

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