409A Valuation
If a pool of equity (stock options) exists for employees of a privately held company, the IRS requires that a valuation of corporate stock be provided every 12 months or after a major milestone (such as closing of a funding round or generating revenue). We work with business owners to ensure IRS compliance with this yearly requirement. Many cap table software providers have a 409A valuation feature embedded into their software product. Technology generated valuations fluctuate wildly and tend to overvalue the stock – thus leading to unreliable valuations and possibly putting a large and unequitable tax bill unto employees. Work with our valuation team to ensure your employees pay the least amount of tax possible.
Gift & Estate Tax
It requires expertise to determine the value of an owner’s interest in a business and quantifying the associated discounts for lack of marketability and lack of control. Both of these assessments have a considerable impact on gift taxes and estate taxes. We perform valuations of shareholder, membership interests and limited partnership in closely held entities and qualified plans, mainly for gift and estate tax and other fiduciary tax reporting needs. We also do valuation of promissory notes as well as divided interests in real property and the LLCs that they usually are held in.
ESOPs
Employee stock ownership plans are a great way to incentivize employees to go above and beyond their roles and duties. To comply with IRS regulations a third-party valuation must be conducted on a yearly basis.
Buy-Sell Agreements
Legally binding contracts that outline how ownership in a business will be managed if an owner leaves the business. They provide clarity and prevent disputes in scenarios like owner’s death, retirement, disability, bankruptcy or decision to sell their stake. These agreements typically have a valuation requirement upon triggering events.
Portfolio Valuation
As the universe of illiquid assets grows so grows the need for a portfolio valuation. Portfolios themselves have grown more complex, incorporating alternative asset investments among the traditional stocks, bonds and cash equivalents. When an investment portfolio includes illiquid, non-public assets, a specialist is often needed to analyze and report the valuation of these investments for financial, investor or lender reporting. Our team works with private equity funds, private debt funds, hedge funds, financial institutions and investors to provide them cost-effective and defensible portfolio valuation opinions.
Fairness Opinions
They are often sought by the company’s board of directors to ensure they fulfill their fiduciary duty to act in the best interest of shareholders. The opinion typically involves a valuation of the company using methods such as discounted cash flow (DCF), comparable company analysis or precedent transactions. It includes a statement of fairness from a financial perspective, supporting data and methodologies used in the analysis, disclosures about any conflicts of interest or fees received by the firm providing the opinion. In some jurisdictions, fairness opinions are used as a defense for boards of directors against legal claims of breaching fiduciary duties in approving a transaction.