Business appraisals don’t come cheap. Depending on the size of your business, the process can cost thousands of dollars. It may seem like an unnecessary expense but there are several reasons to get them done.
Here are some scenarios that call for business appraisals:
Gifting Interests
As a business owner, you’re allowed to give your loved ones an amount of $14,000 which is exempted from Federal gift tax. Gifts of greater value may either be taxable or they will reduce the transferable amount at time of death.
When interest is being transferred to an unincorporated business or shares are being transferred in a corporation, an appraisal is needed to determine the true value of these gifts. It also helps support your valuation in case the IRS happens to challenge it.
Sharing Ownership With Investors
You’ll need a business valuation to determine how much an investor needs to pay to buy into your company.
Smaller investors can use key metrics to come up with an approximate value for the company but investors looking to acquire a substantial interest will need a more accurate number and for that they will require an appraisal.
Creating An ESOP
Companies that wish to share ownership with their employees can use the Employee Stock Ownership Plan commonly referred to as ESOP. Statistics from the National Center of Employee Ownership claim that over 7,000 organizations are using ESOP to cover 13.5 million employees.
Publicly-traded companies rely on market values for ESOP but private organizations will have to make use of appraisals to determine the deduction amount for the contribution of shares.
Selling A Business
No one likes selling a business but the process is that much harder when you’re not receiving the right price.
Large organizations are advised to get their business appraised to get an accurate depiction of how much it’s actually worth. Although the price of a business is largely dependent on the market value, an appraisal will help you make more informed decisions about the transactions.
Litigation
We’re living in litigious times. It’s become common for businesses to get sued and they can’t always rely on insurance plans to back them up. A business appraisal will help you make better financial decisions in case your company is hit with a large lawsuit.
At Independent Appraisal Experts, we provide convenient solutions to clients looking to get their site and machines inspected and appraised. We offer nationwide appraisal services that can be carried out at the fraction of the cost of other companies.
For more information on our machinery equipment appraisals, get in touch with us at 801-809-2565.
