Business Valuation Services


What are Business Valuations?

The majority of closely held business are difficult to value. Their shares are not publicly traded or are not traded at all. For these situations, valuation analysts are called in. Below, we discuss some of the more common situations in which legal advisors and businesses rely on valuation experts.

If you are considering selling your business and just want an idea of what it is worth, you are probably not looking for us. What you need is a broker. A broker can do a basic business valuation for you (for about $1,000), and can help you find a buyer for your business. We recommend Gary Bayus in our local area.

We provide valuations for compliance with financial reporting standards, tax laws, and other regulatory requirements.  Valuations for these purposes range from $5,000 for a basic estate tax valuation, up to $30,000 for a purchase price allocation, in terms of ASC 805.


Estate Tax

For estate tax purposes, the appraiser values businesses and other difficult-to-value assets in the deceased’s estate, such as intellectual property. These values are included in the estate’s value for federal estate tax calculations. The fair market value of each asset, as determined by the appraiser, will also be the asset’s tax basis for the beneficiary.

Estate tax valuations are subject to ever-changing laws, regulations, and court opinions, making these valuations very difficult and filled with uncertainty. If the IRS determines that assets were undervalued, taxpayers could be subject to under-valuation penalties. A taxpayer who had appraisals prepared by a qualified appraiser can avoid these penalties. The taxpayer can use the appraiser’s valuation report to prove reasonable basis of the claimed values.

It is also important to note that a valuation date six months after death can, and should, be selected if the assets are expected to worth less on this later date.


Gift Tax

We strongly advise that a gift tax valuation is always done at the same time as the gift is given. Again, as is the case also with estate tax matters, an independent appraisal serves as support that the determined value has reasonable basis.

Adequately disclosing any gift on a gift tax return also starts the three-year statute of limitations. The IRS is barred from questioning any adequately disclosed gifts once three years has passed.


Oppressed Shareholder

Oppressed shareholder cases refer to situations where a minority shareholder claims to have been treated unfairly or prejudicially by the majority shareholders. The actions of the majority shareholder are often considered more malicious than in shareholder dissent cases.

The most common remedy is to have the majority shareholder buy the oppressed shareholder’s shares at fair value. It can be, however, difficult to determine what a fair value is, considering that the seller is not a willing seller, and the buyer isn’t necessarily a willing buyer.

In California, the valuation term most often used in shareholder oppression cases is “fair value.” There are varied definitions of fair value, and unfortunately the courts has shown little consistency in its application of these definitions.  Discounts for lack of marketability and lack of control are also allowed in California at the Court’s discretion.

Situations with 50-50 shareholdings are often even more difficult to deal with. Although California has a variety of laws dealing with deadlocked boards of directors, shareholder rights, and buy-outs in lieu of dissolution, the strategies in resolving oppressed shareholder cases with 50-50 shareholdings are very subtle and complex, and implicate a whole range of laws and regulations.

California Corporations Code Section 2000 is often used to resolve 50-50 shareholder deadlocks in private corporations, and has its own unique definition of fair value. This definition might also come into play.


Dissenting Shareholder

Dissenting shareholder actions are often the result of minority shareholders not agreeing with the direction that the company’s board of directors is taking. When a minority shareholder believes that he has been adversely affected by such actions, he really only has one practical remedy, and that is for the company to buy his shares.

Delaware is the leading state for guidance when dissenter’s rights or appraisal rights are triggered. Most other states, including California, draw on Delaware case law for guidance in these cases.

In California, the valuation term most often used to determine the price at which the company must buy the minority shareholder’s shares is fair market value. Once again, there has been little consistency with the application of this definition, and a carefully prepared valuation is needed in order to support claims of fair value.


Marital Dissolutions

Valuation work for marital dissolution cases can cover several dates, from the date of marriage to the date of trial. It can involve the valuation of a closely held business of one of the spouses, in addition to other related services. The valuation analyst, who is usually a CPA, often also provides assistance with tax consulting, forensic accounting, and determination of reasonable compensation, personal vs. business goodwill, and community vs. personal property.

The standard of value varies greatly from state to state, and even from county to county. California community property statues and case law specific to business valuations in marital dissolution situations need to considered. These engagements are multifaceted and could go on for an extended period of time.


Buy/Sell Agreements

A well drafted buy/sell agreement can prevent a lot of business transition issues and tax problems. Agreements merely referring to fair value or fair market value could easily create a lot of confusion, because there are so many different interpretations of these terms. The most often disputed issues arising from such agreements are whether discounts for lack of marketability and lack of control should, or should not, be applied. For these reasons, attorneys often involve valuation specialists to help with drafting the terms of these agreements.

A well drafted buy/sell agreement could have the following benefits:

  • It motivates key employees to stay with the business.
  • It prevents unwanted transfers in divorce or bankruptcy situations.
  • It helps determine the required value to insure, to fund a buy-out.
  • It establishes a proper value (“safe-harbor”) for estate and gift tax purposes.


Fair Value for Financial Reporting

ASC 805 Valuation

Companies that made acquisitions need to value the acquired assets and liabilities in accordance with ASC 805, Business Combinations. These companies especially need a valuation expert to help them determine the fair value of the intangible assets purchased, including goodwill.

A valuation specialist should also perform and impairment testing of goodwill, in accordance with ASC 350, in subsequent periods.

ASC 820 Valuation

Investment companies such as venture capital and private equity funds need to value their Level 3 investments in accordance with ASC 820. Valuation analysts often provide valuation assistance to funds for preparing financial statements. The valuation analyst could be contracted to prepare calibration calculations, define market participants, and compile support for discount rates and liquidity adjustments.

SAS 73/ AU-C 620 Using the Work of a Specialist

Valuation analysts provide assistance to audit teams for the audits of purchase price allocations, and other fair value balances. As an auditor’s specialist, the valuation analyst assists the audit team with auditing difficult to value assets such as Level 3 investments, and goodwill.



If you require independent valuations, consulting, expert testimony, or other related services in the above areas, you can contact us and we would be happy to talk you through the options.

Please note that we do not provide valuations in the following areas: Employee Stock Ownership Plans (ESOPs), non-qualified deferred compensation plans, or damages and lost profits calculations.

Capital Coast–CPA and Valuation Firm