Many business owners have more than 85% of their net worth tied to their business, the one significantly non-liquid asset. As a result, getting an independent business valuation is incredibly important.
The valuation report provides the economic worth of the owner’s interest in the business. If the business is part of the estate, a valuation can help you take strategic measures to enhance your company’s value over time and/or reduce tax liabilities prior to exit.
VSP is a professional services firm that offers tax and estate planning valuation support services and company valuation services in Ontario. We have the credentials and expertise to provide you with independent and reasonable valuation, litigation, exit planning or transaction advisory support for various purposes.
VSP supports business owners and their professional advisors throughout every stage of a business’ life cycle, from start-up through to growth, maturity and exit.
Business Valuation and Estate Taxes
Your business value will determine the amount of taxes you will owe. This is either through taxes accrued from capital gains on the sale of shares, taxes on dividends paid in a wind-up of the business or estate taxes on your property after passing. A proper business valuation can help you understand the potential taxes owing and assess your options for minimizing or deferring taxes.
Estate taxes are calculated based on the Fair Market Value (FMV) of the estate’s assets at the time of the owner’s death. An independent valuation is required to determine the FMV of the closely held securities or business interests left by the deceased.
Whether you are planning on selling or passing down your business to your successors, keep in mind that you might be handing them a large tax burden unknowingly.
A business valuation is often required to assess the worth of your assets and better estimate the future tax liability. The valuation report will provide information to help assess the various strategies you can adopt to leave your heirs with the tools to cover or reduce that tax liability.
Gifting Your Business
Obtaining an independent business valuation can help reduce the money that will be owed by the estate by giving portions of the business away during the owner’s lifetime. For instance, part of your estate planning strategy may involve transferring your business as a gift.
Depending on the size of your business, it may or may not be subject to gift tax. To find out if you owe gift tax and the amount you need to pay, you need to determine the gift’s value. Any time a business’s assets and interests are transferred as a gift, a proper business valuation should be done to find the gift tax value and reduce the risk of the government changing the business’s value in an audit.
Business Valuation is Your Golden Ticket
A professionally prepared business valuation report is a vital component to your estate plan. Taking it upon yourself to determine your business’s value is not recommended, especially considering that the government can challenge your assessment. While a professional third-party business valuation doesn’t guarantee that you’ll go unaudited, it can afford greater financial stability and much needed support.
If your business is profitable and constantly expanding, its value is likely to increase over time. Adjustments may be needed, depending on how your estate plan has been structured. You should contact a knowledgeable and experienced valuation expert like VSP to understand the true value of your business.
Contact VSP for Trusted Company Valuation Services in Ontario
Obtaining an independent, professional business valuation is a critical step in wealth management and succession planning.
Our team at VSP offers detailed business valuation services for planning purposes in the context of a potential transaction (e.g. exit planning, purchase, sale, shareholder buyout, etc.) or in situations where no transaction is currently being contemplated.
In addition to professional valuation reports, we also specialize in litigation support, exit planning advisory, and transaction advisory services for both the legal and business communities.
To learn more about how we can help you, call us at (905)-305-8775 or fill out our contact form.