Do business owners “know” the values of their businesses? And do they need help if and when they think about selling, either unexpectedly or as part of a plan? I answer these questions in this week’s post.
Many buy-sell agreements will fail to deliver the fair market value of interests sold following trigger events, even if the valuation of the interests are exactly on point. I’ve written briefly about this topic before, but provide elaboration here.
Shannon Pratt is a living legend in the business valuation community. On Thursday, April 12th, he will celebrate his 85th birthday. This is your opportunity to send him a birthday card!
In this post’s video, I briefly address the definition of disability in a real buy-sell agreement, explain why it will not work if there is a trigger event, and offer an objective suggestion to avoid problems with the definition.
Yesterday, Peter sent me a copy of a New York Court of Appeals case, Congel v. Malfitano. In New York, the Court of Appeals is the appellate court, while trials occur in the lower level Supreme Court. Is this another “bad behavior” case like Wisniewski v Walsh? Let’s see.
One of the biggest and recurring problem with buy-sell agreements is their frequent failure to specify the role of life insurance proceeds. In the accompanying video, I provide a suggestion to solve the future valuation question.
The Tax Cut and Jobs Act of 2017 lowered the marginal corporate federal tax rate to 21%, and all of a sudden, things just aren’t the same anymore. At first blush, the impact of the recent tax cut is straightforward. Lower taxes mean higher after-tax cash flows, which should translate into higher values for businesses. But how much higher? Value is a function of expected cash flows, expected risk, and expected growth. While expected cash flow (after-tax) will be rising following the corporate tax cut, what happens to expected risk and expected growth?
Since the idea of a fixed price buy-sell agreement is appealing and conceptually simple, many companies employ it. The problem is that the parties seldom reset the prices in their fixed price agreements — a major problem in the current environment considering the value of many businesses changed under the new tax law. In this post, we consider the impact of the Tax Cut and Jobs Act on fixed price buy-sell agreements.
The Tax Cuts and Jobs Act of 2017 was signed into law by President Trump on December 22, 2017. President Trump calls the bill the biggest tax cut in American history, and there were substantial reductions in both corporate and personal income tax rates. The tax reduction act will impact C corporations as well as pass-through entities. This post focuses only on C corporations and looks at the marginal impact of the change.
My daughter, Amanda Thompson, authored this blog post for her firm’s blog (Definition 6). I am proud to share the post and, more importantly, proud of my daughter for who she is and for such special words.