Bob Gauvreau explains why you need a formal business valuation before tax planning. Transactions like succession planning, restructuring, and bringing in new owners must be recorded at fair market value, and the IRS expects a professional valuation to back it up.
One of the most common areas, especially working within our office, where business valuations comes up, is any sort of sophisticated tax planning, which could mean succession planning, which could mean estate planning. It could also mean business restructuring. If we want to introduce a family trust, if we want to establish new shareholders, if we want to do a buyout, or bring some of our employees in as owners, all of those would estab establish some sort of triggering event at fair Market Value. And if that's the case, the one way to establish what the fair market value is and what it truly is, and that's backed up and supported by a professional in this space, is to get a formalized business valuation completed. Essentially, we establish with a complex report, but sophisticated, complex report what your business is worth, so that any of this tax planning can be recorded at Fair Market Value. SA.
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