An employee stock ownership plan (ESOP) can facilitate the transfer of a business to the owner’s children or employees over a period of years in a tax-advantaged way. However, the IRS recently issued a statement warning businesses about a range of compliance issues related to ESOPs and announcing plans to ramp up compliance enforcement. The IRS…
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Financial Statement Adjustments in Valuation
The value of a business isn’t directly determined by its historic performance. Instead, investors are more interested in the economic benefits the business will generate in the future. Past performance is only relevant to the extent that it demonstrates trends and is expected to continue going forward. This forward-looking approach applies whether an appraiser uses the cost,…
Valuation Issues to Address in a Buy-Sell Agreement
Buy-sell agreements protect businesses with two or more owners in the event that an owner dies, becomes disabled or voluntarily decides to leave the company. They should dictate who can buy the departing owner’s interest, when, how and for how much. Ideally, these contracts are drawn up when a business is launched, but they can always be entered…