Business valuation services are performed because ownership interests in privately held companies often represent a significant portion of one’s estate and/or portfolio. The value, or worth, of an interest in a privately held company, as opposed to stock in a public company, is usually unknown because there is no active market to sell or trade that interest from which to ascertain or approximate a value. Value determinations are most commonly needed to calculate estate tax upon death, split up family assets in a divorce, or negotiate value in a purchase, sale, or merger of a business enterprise. Besides these, there are many other reasons why a holder of an interest in a privately held company might require a business valuation. Valuations are performed to determine company or stock value for:• Buy/Sell Agreements
• Charitable Contributions
• Damages for Disruption of a Business
• Dissenting Shareholder Actions
• Estate Tax Planning
• Family Limited Partnerships
• Gifts Programs & Gift Taxes
• Marital Dissolution
• Partner Disputes & Split-ups
• Purchase, Sale, or Merger of a Business
• Succession/Exit Planning
• Venture Capital & other forms of Financing
The valuation consultants at Southard, Beckham, Atwater & Berry, CPA PS utilize comprehensive approaches to valuing business interests and have years of experience valuing business interests, family limited partnerships, and retirement plan annuities. R. Christopher Beckham, CPA (shareholder) is a member of the Institute of Business Appraisers and has performed valuation services for over 25 years. Christopher T. Mutchler, CPA, CVA, CFE has been involved in the preparation of business valuations for over five years and earned the accreditation of Certified Valuation Analyst (CVA) in 2006.
Our business valuation consultants provide the level of service you require, ranging from informational “calculations of value” to comprehensive formal valuation reports. We will assist you in determining which of the valuation services are appropriate for your situation:
I. Formal Valuation Report
This comprehensive, narrative report expresses an independent opinion on the value of a business interest. The report provides a logical progression and clearly communicates pertinent information, valuation methods, and conclusions. The result is an accurate, easy-to-understand and defendable report on the value of your business.
For income tax purposes, certain transactions may require determining the fair value of stock in a closely held business to accurately assess tax liability that can help avoid overpayment or underpayment of taxes. Business Valuation Guidelines were revised July 1, 2006 and published in the Internal Revenue Manual for all IRS employees who review (audit) formal valuation reports prepared by others. The Guidelines are essentially an “audit program” which outlines procedures and forms of analysis to ascertain the appropriateness of formal valuations used for federal tax purposes.
If you need a formal valuation report, you need to be confident the appraiser you hire has the expertise and credentials to perform a defendable valuation that may be challenged by the Internal Revenue Service. The business valuation professionals at Southard, Beckham, Atwater and Berry, CPA PS possess the experience, knowledge of valuation techniques and credentials to give you the confidence that your valuation will be done right the first time.
II. Summary Letter Report
If the report is for internal client use only, we can issue a summary letter report that states the material factors leading to the report’s conclusions. Summary letter reports generally involve the same in-depth analysis as a formal valuation reports, however much of the detail required in a formal valuation is omitted from a summary letter report to reduce costs. If a third party challenges the value conclusion in a summary letter report, we can use additional work-file information to produce a corresponding formal valuation report.
III. Calculation of Value
For calculation of value engagements, which provide an approximate indication of value, we perform limited procedures agreed to in advance with our client. This type of engagement is appropriate when a client wants an estimate of business value, but does not require a formal opinion.
IV. Litigation Support
In addition to preparing written valuation reports, our valuation professionals offer the experience and credentials to provide trial preparation assistance, expert testimony and review of other expert reports.
The IRS Toughens Penalties for Business Appraisers
The Pension Protection Act of 2006 added new rules that apply to qualified appraisals (valuations) including who can perform them, and new accuracy-related penalties. Who is a “qualified appraiser” is now defined by Statute. In general, under prior law Reg. Sec. 1.170A-13(c)(5) allowed an appraisal if the appraiser held himself out as an appraiser or regularly performed appraisals; had some subjectively adequate credentials, knew about the civil fraud penalties and was not a disqualified person.
Now, the appraiser needs either “an appraisal designation from a recognized appraiser organization” or has met “minimum education and experience requirement” established by the Secretary. New credential requirements are complemented by penalty provisions set forth in new Code Section 6695A. Valuation penalties have also been strengthened. Under Code Section 6662(e), a substantial valuation misstatement for income tax penalty purposes is 150% of the correct valuation, reduced from 200%. A gross valuation misstatement is now 200% of the correct value, down from 400%.
Why Southard, Beckham, Atwater & Berry, CPA PS?
We believe that when it comes to business valuation services, not all firms are alike. It is a specialized field where a consultant’s professional certifications and the Company’s commitment to continuing education make a big difference. At Southard, Beckham, Atwater & Berry, CPA PS, our valuation consultants have applicable certifications, attend continuing education conferences and are members of either the National Association of Certified Valuation Analysts (NACVA) or the Institute of Business Appraisers, Inc. (IBA).
