When should you get a business valuation?

By Williamson Law Firm, PLLC on February 10, 2020 • Firm News

Getting a business valuation is something some business owners in Texas choose to do, but it is not always necessary. So how can you know if this is right for your business?

Smart Business states that a business valuation can raise prospects for growth, lower the risks associated with running a business and even increase the flow of cash. But it all comes down to knowing the right place and time to go through this process. Some business owners find it is a good practice to get a business valuation done once every other year, while others only do so in certain events.

Succession and estate planning

A valuation should be done five years in advance of any succession plan. An obvious situation calling for a business evaluation would be in estate planning, as it is important to be aware of the value of any assets you bequeath to your loved ones or business partners.

Triggering events

Certain events provide exigence for a business evaluation. These include charitable contributions, converting from a C-corp to an S-corp and providing new plans for employees to take ownership of stock.

Dispute-related valuations

Sometimes certain disputes may trigger a necessary valuation. For example, a divorce between married shareholders would require an equitable distribution of assets. A disagreement between shareholders may require a firm knowledge of your business’s value.

Other reasons for a business valuation

Other instances which might call for a business valuation are numerous and can include the estimation of the compensation of equity or the death of a shareholder. If you should choose to give some closely held stock as a gift, you will want to know its value.

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