Business Valuation

A business valuation is the process and procedures used to determine what a particular business is worth. Such a valuation can be used to determine the worth of the business as a whole, and also, consequently, the economic value of an owner’s separate interest in the business.

Valuation of a business is typically necessary when the company decides to sell its business, or when one or more of the owners departs the company thereby triggering a buyout or redemption agreement. However, a business may also be valued for various purposes such as mergers and acquisitions, sale of securities, and other taxable events. Furthermore, a business valuation may be necessary if there is a shareholders’ deadlock, other disagreements, or if there is another issue affecting an owner’s ownership interest. This could include a divorce proceeding or estate contest. Accordingly, this documentation is then necessary to determine the exact value of an owner’s interest in a company.  

Types Of Business Valuations

Typically, there are three business valuation approaches (1) asset approach; (2) market approach; and, (3) income approach.  The asset approach is based on the economic principle that a business is a set of assets and liabilities, which can be used to construct a picture of a business’s value. A market approach, on the other hand, uses the signs from the real market to determine what a business is worth by comparing similar businesses to create a responsible sale price. Finally, the income approach looks at the future expectation of the money that the company will make to determine the value of the company.  In addition to the financial considerations used to determine the business value, non-financial considerations, such as the businesses’ location or brand name, are often also considered and included in the valuation of a company in an attempt to achieve the most accurate value.   

How Antonoplos & Associates Can Assist You

A business valuation analysis is often required for many financial and legal situations. For more information on business law, please contact Antonoplos & Associates at 202-803-5676 or schedule a consultation with one of our attorneys. For additional information regarding business law, check out our blog.