Bob Gauvreau explains that formal business valuations are commonly required or highly recommended in situations such as shareholder disputes, partner buyouts, deaths of shareholders, and intergenerational transfers. Valuations establish fair market value at a specific point in time so ownership percentages can be accurately paid out or transferred; the speaker offers the firm's valuations team as a resource.
Chapters
One of the areas where business valuations comes in very handy is when we have some sort of shareholder dispute, partner buyout, or an intergenerational transfer from one family member to another. And a lot of instances as a business owner, if you've got partners or multiple shareholders, you've got an established agreement, and inside that agreement it either is a partnership agreement or a shareholders agreement. In there, there's typically timing components that say at this particular time, maybe when one owner is deciding to exit, or if there's a death with one of the shareholders, or if we're identified at a certain date. A lot of times there's a requirement in there to have a formalized business valuation completed. And what that means is that the business is valued at that current moment in time to establish the fair market value so that one of the shareholders can buy out another again. Sometimes it happens upon death where if one of the shareholders passes away, evaluation is required. So we establish the value and make sure that their respective percentage of ownership is paid out to their family. So looking at any sort of partnership, shareholder disputes, buyouts, in those cases where it's inner management, one person's getting bought out or another person is buying another person out, typically required, definitely highly recommended. And then also on any sort of intergenerational transfer from one, maybe a parent to a child, we want to establish that same value again to make sure that all of these transactions are taking place at fair market value. And if that instance comes up, our business valuations team can support you by doing a formal business valuation on your business.
