BC Journal

A business valuation has many applications, including serving as support for various financial and estate planning initiatives to strategic decision making. Very often, formal business valuations (also referred to as appraisals) are used as supporting IRS documentation when someone transfers or gifts assets to another party. They are also useful and often needed in the context of partnership or shareholder agreements, updating incentive stock programs and sale/succession planning, among other applications. They are many flavors of valuations, so it is critical to understand the basis and approach of the appraisal to ensure it is useful for the intended planning objective.

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A business broker and M&A advisor are two professional service providers that can assist a business owner in selling their business. Both can be great resources to their clients, but there are differences in their respective approaches.

A business broker typically works with businesses that are worth less than $1 million - $2 million in value (e.g. main street businesses). They often post a business for sale on a listing services with a desired asking price for the business. Alternatively, a M&A advisor works with businesses in the middle or lower middle market - customarily with values greater than $5 million all the way in excess of $100 million.

M&A advisors run various sales processes, ranging from a direct negotiations to auction sale processes, but typically do not set an asking price and rather work with a targeted set of buyers to develop a competitive offer for their client.

There is no formal set process that either advisor type rigidly follows, but there are distinct differences in the client types, buyer groups, and sale strategies they employ. Fit depends on a number of factors influenced by the selling business's profile and natural market.

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Probate is a legal process that governs the distribution of a deceased person's Probate Assets.

Probate Assets definition:
• Assets that do not pass by operation of law (such as jointly owned property)
• Assets passing by operation of contract (such as life insurance or IRAs that have named beneficiary other than the estate)
• Assets owned by a properly drafted trust at the time of death

Probate process includes:
• Proving that a deceased person's will is valid.
• Appointing the executor* (or administrator if the deceased dies without a will) who will oversee the probate process for the deceased’s estate.
• Identifying the probate property.
• Inventorying and valuing (via appraisal) the probate property.
• Paying debts, taxes and expenses of probate.
• Distributing the remaining property as the will directs or as state law directs, if the deceased died without a will (intestate).

*The executor/administrator is a fiduciary and must act with good faith, diligence, and honesty on behalf of the estate to preserve the estate assets for the benefit of its heirs.

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