How do you set a value on the business for purposes of a buy-sell agreement or other reasons?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Since execution of a buy sell agreement or other possible transactions require an estimation of the value of the business. It is essential that a valid method for determining an accurate value be available. The agreement may have been draw up long before the time that the value needs to be determined. An accurate method that can be used when needed is essential. The calculation techniques aim at determining the ‘fair market value’ of the business. The two primary techniques focus on the earning power or the assets of the business. Adjustments and judgements can also come into play as well as IRS advisory rulings relating to the valuation techniques.

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