Business Valuation Services
EquiVal offers a broad range of services for the valuation of closely held business interests in connection with estate planning, business transfer and financial transaction needs:
Section 83(b) Elections
Employees receiving shares from an employer can recognize income on the fair market value of those shares. The Section 83(b) election allows subsequent appreciation to be taxed at lower capital gain rates. EquiVal can determine the pro-rata value of these shares by considering the lack of marketability, minority interest discounts and other evidential data from transactions including restricted stock sales.
A Buy-Sell agreement can protect your business investment. It can also make cash available following the untimely departure of an owner and set a fair selling price upon an owner's disability, retirement or death. A Buy-Sell Agreement may set the valuation for estate tax purposes. This allows owners to plan their estates and reduce the risk of costly valuation disputes among the owners or upon an estate tax audit. EquiVal can help business owners establish buy-sell agreements by determining the valuation of the business and reviewing agreements for clarity and consistency.
The IRS requires a qualified appraisal to be made of certain illiquid assets, including closely held business interests, for which a charitable deduction is claimed.
Employee Stock Ownership Plans
EquiVal provides well documented, unbiased, and supportable valuation services for Employee Stock Ownership Plans (ESOPs). Our services include initial valuations to determine ESOP feasibility, valuations required to establish an ESOP, and the required annual valuations of ESOPs to meet the needs of regulatory agencies.
Estate Planning and Administration
Illiquid assets which are gifted or bequeathed must be assigned a value for gift or estate tax purposes. EquiVal can help ensure that estate transfers meet tax and regulatory requirements by establishing a "reasonable basis" for the valuation through a qualified independent appraisal. What's more, many estate and gift tax planning methods for reducing tax liability require a professional valuation for validity.
Family Limited Partnerships and LLCs
The use of family limited partnerships (FLPs) and limited liability companies is a common method used by estate planners to legitimately reduce gift and estate taxes. By restructuring the way assets are titled, an FLP allows senior family members to pass assets to their beneficiaries at a discount to the assets’ value, while maintaining control of those assets during their lifetimes. EquiVal regularly performs valuation services in connection with these popular wealth transfer tools.
Financial Reporting and SEC Requirements
In today’s regulatory and business environment, there has been increased need for valuation services in connection with audited financial statements. There are many financial and tax reporting circumstances that require qualified, independent valuations. For example, when a company goes public, issues stock options, or transfers or sells equity interests, a valuation may be required for reporting purposes. EquiVal performs valuation work on those critical issues that have the potential to impact a company’s books, records or tax filings.
Grantor Retained Annuity Trusts
A grantor retained annuity trust (GRAT) is an irrevocable trust to which the grantor makes a gift of money or property, and reserves the right to receive a fixed annuity for the term of the trust. GRATs are commonly used to transfer appreciating assets, such as a family business or growth investments, to a younger generation -- removing the appreciation in value from the owner's estate. EquiVal has the tools and expertise to apply the special valuation rules that must be followed in setting up GRATs involving closely held business interests.
Recapitalizations provide a business owner with the opportunity to sell a portion of the company while maintaining a significant ownership position. EquiVal has extensive experience in providing valuation services in connection with business recapitalizations.
Since restricted stocks are not freely tradable, they lack liquidity compared to publicly traded stocks. Consequently, the market price of public stocks may not provide a reasonable estimate of the value for restricted stocks. A valuation adjustment, or discount, is often made that reflects this lack of marketability or liquidity, including the effects of blockage on the subject shares. Discounts can vary widely depending on the economic circumstances involved with the stock. EquiVal can provide an expert valuation for restricted securities by providing review and analysis of a variety of operational, financial and economic factors.
The election of S corporation status can help a corporation reduce its tax liability by having its income taxed at the individual level rather than at the more costly corporate level. However, an S corporation that has previously operated as a C corporation is potentially subject to the "built-in gains" tax - a corporate-level tax on appreciation in the value of assets held on the day a corporation converts to S status. A valuation can provide valuable support to limit the amount of built-in gains subject to the tax.
Transaction or Strategic Planning
EquiVal can help business owners determine the estimated market value for the transfer of a business entity. A valuation can also be used in mergers and acquisitions as part of due diligence. A business valuation from EquiVal can also be the foundation for a long-term strategy to enhance the value of a business.
Undivided Interests in Property
EquiVal is a recognized expert in the appraisal of undivided interests. The valuation of undivided, or partial, interests in real property requires consideration of many elements. We have extensive experience in the valuation of undivided interests for gift and estate planning and administration, and in the Qualified Personal Residence Trust (QPRT) context.