Exit Strategy Services
Reap Maximum Benefit by Incorporating our Business Valuation Together with Effective Tax Planning
Accountancy Associates, LLC (AAL) and our alliance partner International Tax Advisors, Inc. (ITA) provide our clients with a full-service, one-stop tax and estate plan. ITA’s strategic tax consulting provides specific recommendations for entity structuring, asset protection, tax savings, employee retention, succession planning, retirement and estate planning. A key element in each of these areas is business valuation. Effective planning, especially estate, succession and retirement planning cannot be achieved without knowing the value of the business.
A business is likely a business owner’s largest, most valuable asset
Yes, a quick value of the business asset can be provided, but it won’t calculate a definitive, professional opinion of value. In fact, an inaccurate value could lead to recommending incorrect tax planning strategies; therefore, a business valuation is a logical element in the overall tax planning schemata.
For example, succession planning involves transferring ownership interest or stock to family members, partners or key employees. The transfer must take place as promulgated under the Internal Revenue Code (IRC) and Treasury regulations. Treasury regulations specifically mandate, among other things, an arms’ length transaction at a price for not less than full and adequate consideration. A precise value of the business interest or stock cannot be established without a professional business valuation that abides by IRC and Treasury regulations and is conducted by an experienced, accredited valuator.
An inaccurate, understated value of the ownership interest calculated through means other than a professional valuation can lead to underpaid capital gains tax or gift tax.
If a professional valuation had been conducted to correctly assess ownership interest value, a strategy that reduces tax consequences may have been recommended, such as transferring stock utilizing the annual gifting exclusion or through a well-structured installment sale, versus a strategy that doesn’t consider tax consequences as much as it does the ease of stock transfer.