Do Business Owners “Know” the Value of Their Businesses?

Dangers of Thinking of a "Walk-Away Number" as the Value

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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.

The Promissory Note You Receive May Undermine the Fair Market Value of Your Stock

Buy-Sell Agreement Seller Beware | A Lesson via Video

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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.

How to Avoid Problems with the Definition of “Disability” in Buy-Sell Agreements

A Valuation/Business Lesson on Video

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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.

Congel v Malfitano: “The Value” or Fair Value or Bad Behavior Value in New York?

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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.

How to Avoid Valuation Problems with Life Insurance Associated with Buy-Sell Agreements

A Valuation Lesson on Video

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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.

Business Valuation: Things Just Aren’t the Same Anymore After the Tax Cut and Jobs Act of 2017

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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?

Valuation Implications of the Tax Cuts and Jobs Act of 2017

Focus on Privately Owned C Corporations

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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.

Dividend Policy Is Part of Corporate Finance for Private Companies

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Business owners are faced with three universal questions as they run their businesses. These questions are addressed by every business every year, one way or the other, directly or indirectly, consciously or unconsciously. This post addresses these three questions.