Small Business Valuation
If you require
a Small Business Valuation, we can help. Call Us at 713-661-1040.
The Internal Revenue
Service has issued guidelines for the valuation of Small Business
and Closely Held Stocks
REVENUE RULING 59-60 - VALUATION OF CLOSELY-HELD STOCKS
Internal Revenue Service Ruling 59-60 provides guidelines
for the valuation of closely-held stocks. Revenue Ruling 59-60
states that all relevant factors should be taken into consideration,
including the following:
1. The nature of
the business and the history of the enterprise from its inception.
2. The economic outlook in general and the condition and outlook
of the specific industry in particular.
3. The book value of the stock and financial condition of
the business.
4. The earning capacity of the company.
5. The dividend paying capacity of the company.
6. Whether or not the enterprise has goodwill or other intangible
value.
7. Sales of the stock and the size of the block of stock to
be valued.
8. The market price of stocks of corporations engaged in the
same or
similar line of business having their stocks actively traded
in a free
and open market either on an exchange or over the counter.
Since determining
the fair market value of a business is the question at issue,
one must understand the circumstances of this particular business.
There is no set formula to the approach to be used that will
be applicable to the different valuation issues that arise.
Often, an appraiser
will find wide differences of opinion as to the fair market
value of a particular business or business interest. In resolving
such differences, one should recognize that valuation is not
an exact science. Revenue Ruling 59-60 states that “a
sound valuation will be based on all relevant facts, but the
elements of common sense, informed judgment and reasonableness
must enter into the process of weighing those facts and determining
their aggregate significance."
The fair market
value of specific shares of stock in an unlisted corporation
will vary as general economic conditions change. Uncertainty
as to the stability or continuity of the future income from
the business decreases its value by increasing the risk of
loss in the future. The valuation of shares of stock of a
company with uncertain future prospects is a highly speculative
procedure. The judgment must be related to all of the factors
affecting the value.
There is no single
formula acceptable for determining the fair market value of
a closely-held business, and therefore, the appraiser must
look to all relevant factors in order to establish the fair
market value of the business as of a given date.
If you require a Small Business Valuation, let us put our
expertise to work for you, give us a call today.
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