As a business owner, one of the most valuable assets that you own is your business interest. When you must determine the value of your business for a legal or financial purpose, it is important that you accurately evaluate the worth of your partnership. Working with an experienced appraiser and lawyer can help you properly assess your partnership’s value.

Reasons Why Partnership Values Must Be Appraised

There are various reasons why you may need to associate a particular value with your partnership. You may be getting a divorce and need to determine your spouse’s share of your ownership interest. You may be planning your will or trust and want to consider your business interest in line with other assets to leave a fair distribution to your children or other beneficiaries.

You may be planning on bringing in another partner and need to determine a fair buy-in price for a new partner. Or, you might be considering merging with another business and need to know accurate valuations for your current business interest. If you are considering selling your business or filing bankruptcy, you may also need an accurate evaluation.

All of these situations all rely on an accurate valuation of your business.

Common Methods to Evaluate Partnerships

There are several ways to determine the value of your partnership. Your partnership agreement may discuss the method that you and your partners chose at the inception of your business. If your agreement is silent on the matter, other valuation options include:

  • Market approach – This method analyzes your transactions compared to similar businesses, including their type of business, size and profitability. Often, you multiply this value by a variable, such as 2 or 10 to determine the true value of the business.
  • Income approach – Another method to evaluate a business is to use the income approach, which measures the expected future cash flow of the business and the relative risk of the business and the market.
  • Asset approach – This method may be the simplest to calculate and requires you to add up the value of the various assets owned by the business to determine the value of the business.

Contact an Experienced Lawyer for Help Appraising Your Partnership

An experienced lawyer can help you determine a fair way to value your partnership. Additionally, he or she can discuss certain factors that should increase or decrease the value of the business, such as if the business has generated goodwill, if a partner’s credibility and background increase the value of the business, lack of control of the business or lack of marketability of the business. Contact our esteemed lawyers today to schedule a confidential consultation.

 

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