Business Valuations for Gifting and Estate Planning

Overview

A major portion of Sun Business Valuation’s practice involves preparing valuations for estate and gift tax purposes.  Estate and gift taxes are levied on the basis of the fair market value of the assets in the estate.  When these assets include an interest in a closely-held business, it is necessary to have a valuation of the business interest.  It is imperative to have a professional accredited third party business valuation filed along with an Estate and Gift Tax return.  

Estate Taxes

A comprehensive, well-supported business valuation is crucial upon the death of a shareholder for tax compliance purposes.  Sun Business Valuations utilizes commonly accepted valuation methodologies that comply with the Uniform Standards of Professional Appraisal Practice (USPAP) and adhere to the valuation guidelines established under Revenue Ruling 59-60 for gift and estate tax purposes.  

Effective tax planning by a business owner in advance of their death can help minimize estate taxes. Knowing what their company is worth can be used to help the business owner arrange adequate liquidity (usually through life insurance) to cover the estate taxes.  Additionally, a business owner may choose to reduce future estate taxes by gifting shares of their company stock, during their lifetime, to the eventual heirs.  This gifting of share requires an accurate and up to date valuation of the business.  

Majority and Minority Interests

A business interest can be a controlling (majority) or a minority interest.  Valuations of minority interests in closely held family limited partnerships (“FLPs”) or limited liability companies (“LLCs”) often involve significant discounts for lack of control and lack of marketability.  Because these discounts have such a large impact on overall valuation (often ranging from 20% to 40% of the overall value), a proper and well documented valuation report is critical.   

Related Business valuation services offered include:

  • Succession Planning
  • Gifting of closely held stock and partnership/LLC interests
  • Creation of non-voting stock for gifting purposes
  • Date of death valuations or estate purposes
  • Whole or Fractional Ownership Interests in FLPs, LLCs, or Closely Held Businesses

What's your company worth?

Please contact us to discuss your business valuation needs. Call (800) 232-0180

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