Three Common Triggering Events; Business Valuation
Three Common Triggering Events; When you should consider a Business Valuation.
Knowing the appropriate time to perform a valuation is not only smart but can also save you a lot of money, taxes and headaches.
Often considered both an art and a science, business valuations determine the value of a specific interest in a company on an independent and objective basis. Business Valuations can provide meaningful insights that enhance decision making for strategic, tax and asset division purposes.
1. Estate Planning
Valuation is often a critical component of proper estate planning. Estate tax is calculated based on the FMV (fair market value) of the estate’s assets at the time of death, a valuation is often necessary to determine and support the FMV of closely held business (private company) interest.
At the time of death all the assets of the deceased are “deemed” to have been sold just prior to death for tax purposes and all the inherent tax liabilities are triggered from capital gain right town to ordinary business income. Further, final tax returns are at a significantly higher risk of a CRA audit than the individual annual tax returns.
2. Strategic Business Planning
While business are often valued as part of an exit strategy and ultimate sale or transfer of ownership, it is likewise beneficial for small businesses to conduct periodic valuations to establish a value baseline, identify value gaps and aid in formulating a plan to grow value over time. Periodically updates every 12-24 months should be performed to track the progress being made. In short, business valuations supplement strategic decision making and focus management on business growth.
3. Marital Dissolution or corporate divorces
When divorce occurs, there may be business interest at stake as part of the matrimonial assets. Splitting up a matrimonial assets, liabilities and calculating equalization payments can be a long and complicated process. Chartered Business Valuators can assist attorneys and their clients address questions surrounding the business value, income for support purposes and help avoid certain issues such as double dipping. It is best to involve a business valuator in the early stages to settle some of the low hanging fruit.
Estate planning, strategic business planning and marital dissolution are only three common scenarios where an independent valuation are necessary, beneficial and can save the owners a lot of taxes, fees and headaches. Regardless of the circumstances, contacting a trusted independent Chartered Business Valuator will assist you to value your business interest that will stand up to scrutiny by both the courts and the CRA.
At Malahat Valuation Group we specialize in helping business owners determine the value of their business assets that stand up to scrutiny. We provide business owners and their advisors a
Malahat Valuation Group Inc.