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How are assets valued – a share in a family business 

On Behalf of | Oct 27, 2022 | Small Business |

Before probate can be completed, the total value of the estate needs to be calculated. The executor will need to know a definite amount, subject to any expenses or debt, that’s then payable to beneficiaries. 

Certain assets, like property and cash in the bank, will be easy to value. Others, such as an interest in a business, are not tangible and are therefore more complicated and can be a challenge. What’s the process for valuing businesses for probate purposes? Here’s what you need to know:

There are 3 common methods used to value a business

One of the best ways of valuing a business is to employ a business appraiser, as allowed under Minnesota law. 

There are three ways a business is usually valued: 

  • Book value – in simple terms, how much is the business worth when the liabilities are taken away from the assets? 
  • Income – an appraiser will look at how much money the business has earnt over the last few years in order to calculate an estimate of future earnings. This takes a number of factors into account, such as the age of the business and the volatility of the market the business is in  
  • Market approach – how much is this business worth compared to others in the same market that have recently been sold? 

Once a business appraiser has followed one or more of the valuation approaches above they will put together a report with their findings. This will explain what value they give the business and how they came to that conclusion. 

When a loved one passes away, the process of settling their estate can be a difficult task to undertake – especially when you’re grieving. Experienced legal guidance can ease the burden and make sure everything goes as smoothly as possible.