Estate and gift planning may involve transferring part or all of a privately held business to family members, business partners, or future generations. Before making a transfer, the owner needs to know the fair market value of the business interest. As such, choosing a business appraiser is an important part of the planning process.
A qualified appraiser provides an independent opinion of value that can support tax reporting, ownership transfers, and succession planning. The business valuation gives the owner and professional advisors a clear basis for making decisions.
Peak Business Valuation prepares business valuations for estate and gift planning. Our certified business appraisers use accepted valuation approaches and methods for business owners, attorneys, accountants, and financial advisors. Schedule a free consultation with Peak Business Valuation to discuss your valuation needs.
Why Is a Business Valuation Needed for Estate and Gift Planning?
A business valuation estimates the fair market value of a company or ownership interest as of a specific date. This value provides support when an owner gives shares to a family member, transfers ownership through an estate plan, or reports a taxable gift. Without a credible valuation, the owner may not know the value of the interest being transferred. Relying on a rough estimate alone may also raise questions if the Internal Revenue Service reviews the transfer.
Furthermore, a valuation helps the owner and advisors plan the timing and size of future transfers. For example, an owner may transfer smaller interests over several years instead of transferring a large interest at one time. Periodic valuations also allow owners to update the estate plan as business performance, industry conditions, or ownership goals change.
Why Choosing a Business Appraiser Matters
Choosing a business appraiser matters because not all appraisers have the same education, credentials, or experience. Some value real estate or equipment, while others focus on privately held businesses. Estate and gift tax valuations also have reporting needs that may not apply to other assignments. As such, finding a business appraiser who has experience with estate and gift planning is ideal. An appraiser who often performs this work understands the records attorneys and tax advisors may need. This experience can reduce delays and result in a report that is easier for the planning team to use.
Qualifications to Review
There are several qualifications business appraisers should have to meet professional valuation standards. Below are the qualifications business owners should review before hiring an appraiser:
Professional Credentials
Appraisers with recognized credentials like the CVA, ABV, and ASA demonstrate sufficient valuation education and professional standards.
Estate and Gift Experience
The appraiser should regularly conduct business valuations for estate and gift tax purposes.
Industry Experience
Past experience in your industry ensures the appraiser understands the company’s risks and sources of value.
Independent Analysis
The appraiser should provide an unbiased opinion based on the available facts.
Clear Communication
The appraiser should explain the process, assumptions, and conclusions in plain language.
Peak Business Valuation works with owners and their advisors to identify the records needed for an estate or gift tax valuation. Our valuation experts prepare an independent analysis based on the information provided. Schedule a free consultation below to learn more.
What Information Will the Business Appraiser Need?
A business valuation requires financial, ownership, and operating information. Providing accurate records helps business appraisers understand how the company earns money and what risks may affect future cash flow.
Important information to provide includes:
- Financial Statements: Income statements and balance sheets show changes in revenue, expenses, assets, and liabilities.
- Tax Returns: Tax returns help the appraiser compare reported results with internal records.
- Ownership Documents: Operating agreements and ownership schedules show the rights attached to the interest being valued.
- Customer and Supplier Data: Customer lists, supplier records, and relationship details help the appraiser evaluate concentration risks and potential impacts on value.
- Management Information: The appraiser reviews the roles of owners, managers, and key employees.
- Asset Information: Records for equipment, real estate, inventory, and other assets explain the company’s financial position.
Business appraisers may also ask about the company’s history, competition, growth plans, and recent changes. Gathering this data early can make the valuation process more efficient.
Common Mistakes When Choosing a Business Appraiser
Choosing the wrong business appraiser can create issues with the valuation process and the final report. As such, credentials and relevant experience are important factors when choosing a business appraiser. A general background in finance does not replace formal valuation training. Therefore, a business appraiser should understand the requirements associated with estate and gift tax valuations. The appraiser should also remain independent and not have a financial interest in the transfer.
In addition, timing and preparation can affect the valuation process. Waiting until a deadline can limit the time available to gather financial statements, ownership records, and other information needed for the analysis. Providing complete information and selecting a qualified business appraiser early can reduce delays and support a credible final report.
Questions to Ask Before Hiring a Business Appraiser
Having a short discussion with a business appraiser can help the owner understand the appraiser’s experience and process. Useful questions include:
- How many estate and gift tax valuations have you completed?
- What business valuation credentials do you hold?
- Have you valued companies in this industry?
- What documents will you need?
- Which valuation approaches and methods will you consider?
- How will you address ownership rights and company-specific risks?
- What will the final report include?
- What is the expected completion schedule?
Choosing a business appraiser is an important step in the estate and gift tax valuation process. Asking the right questions helps business owners understand the appraiser’s experience, approach, and ability to complete the assignment. If you have any questions, you can speak with a professional appraiser at Peak Business Valuation. Schedule a free consultation to get started!
Conclusion
Choosing a business appraiser is an important part of estate and gift planning. A qualified appraiser provides an independent estimate of fair market value that can support ownership transfers, tax reporting, and succession planning.
Peak Business Valuation prepares estate and gift tax valuations for businesses across many industries. Our certified business appraisers work with owners, attorneys, accountants, and financial advisors to provide objective analysis based on accepted methodologies. Schedule your free consultation with Peak Business Valuation below to get started.
