Valuation of Closely Held Businesses in Estates
The process of determining the fair market value of a closely held business for the purposes of estate planning, tax compliance, or probate proceedings.
This valuation is particularly important because closely held businesses, which are not publicly traded and typically have a limited number of shareholders, can be challenging to appraise accurately. Factors considered in the valuation include the business’s financial performance, assets, liabilities, market conditions, and the potential for future earnings.
For example, when an individual passes away, the value of their closely held business must be assessed to determine the estate’s worth for tax purposes. This valuation affects the estate tax liability and distribution of assets among heirs. The use of professional appraisers or CPAs specializing in business valuation is common to ensure accuracy and compliance with relevant regulations.
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