Bratton, McMorrow & Associates LLP

Business Valuations

Selecting a Valuation Professional
The two most senior credentials for business appraisers - and the most difficult to obtain - are Accredited Senior Appraiser (ASA), awarded by the American Society of Appraisers, and Certified Business Appraiser (CBA), awarded by the Institute of Business Appraisers. Stephen D. McMorrow, the partner in charge of all appraisal work at BMA, holds both credentials as well as being a CPA. Stephen's combination of credentials is important when defending an appraisal report in court, before the IRS or with your business partners and associates.

Valuations of Interests in Asset-Holding Companies
An asset-holding company is usually a partnership or limited liability company (LLC) that owns assets such as real estate or securities. The partnerships are often called family limited partnerships (FLPs) because the partners are family members. Senior family members may transfer assets to the FLP or LLC for a variety of reasons, including:

  • Centralization of management
  • Protection from creditors
  • Gifting to other family members

Litigation Support
BMA assists with litigation matters by helping attorneys assess the valuation issues of cases, either with an appraisal report or verbal guidance on valuation matters. BMA can also:

  • Draft questions to ask the opposing expert (or the principals) regarding the valuation issues
  • Review the business appraisal report prepared by another expert
  • Rebut testimony regarding the opinions and comments of opposing experts concerning the value of the business interest.

BMA experts have been trained to perform as credible witnesses in assisting the court to arrive at fair and equitable resolutions

Valuations for Marital Dissolutions
The valuation of a business or professional practice is often an area of disagreement in what is already an emotionally charged proceeding - the dissolution of a marriage. BMA is familiar with the climate in which valuations for divorce are prepared and with applicable statutory and case law as it relates to valuations for marital dissolution. We may be retained by one or both parties, or appointed by the court, to provide an independent opinion on the value of the business or business interest.

Owner Agreements
Businesses change over time, which is one reason it is important to address valuation issues at the inception of a business. Every business with multiple owners should have a buy-sell agreement that defines what happens when one of the owners dies, becomes disabled or departs the business, or if the owners want to part ways because they do not see eye-to-eye on how the business should be run. BMA can help you and your attorney define the terms of such agreements and review them periodically to make adjustments for any changes that may occur.

Purchase or Sale of a Business
The purchase or sale of a business can be one of the most important financial events of a person's life. BMA can assist buyers and sellers in determining the value of a business, either with a valuation report where we provide an opinion of value, or with a consulting engagement, in which we perform a cursory review of the financial data to provide verbal guidance on a range of possible values.

Shareholder/Partner Buy-Out
When an owner leaves the business, voluntarily or otherwise, the remaining owners may be forced to buy that individual's interest. Sometimes this process is upsetting and damaging for the business. The language of the buy-sell agreement, often drawn up using standard boilerplate language when everyone is getting along, may not fit the needs of the parties at this juncture. BMA can assist by helping the parties understand the valuation process and showing them how a fair value might be reached that could avoid argument, or even costly litigation. BMA can then prepare a valuation report that shows the value of the business from the point of view of a disinterested party.

Estate Taxes
When someone dies with an estate that has a fair market value of more than $2 million, the estate must file an estate tax return, known as Form 706. If the deceased owned a business, business interest or interest in an asset-holding company, the estate must include an appraisal report showing the value of those assets. BMA has prepared many such reports and knows the requirements that must be met to withstand an IRS audit.

Valuations for Gifting
Succession planning and family wealth transfer are major issues. Through careful planning, minority interests can be transferred at values reflective of the minority status of each of the gifted interests. Properly handled, 100 percent of the ownership of the business can be transferred over time at a fraction of its value.

Many Tax and Appellate Court rulings have addressed valuations of minority interests for gifting. Generally, the rulings reflect the Court's possible lack of respect for parties with appraisal reports or testimony that reveal a lack of any of the following:

  1. Business valuation credentials
  2. Independence in that their work was prepared as an advocate (unethical)
  3. Training, experience and knowledge, which led to their appraisal methodology being improperly developed or inadequately supported

At BMA, we have the experience and credentials to provide well-reasoned and defensible appraisal reports.