Using Forensic Accounting Skills to Your Advantage When valuing a business, one essential step in the process is to review and analyze the subject company’s historical financial information. This information allows a business valuator to analyze the company’s past performance and pinpoint trends in the business to forecast its future performance. The author in this article shares his opinion regarding items that a business valuator may encounter in an engagement that merit normalization. When valuing a business, one essential step in the process is to review and analyze the subject company’s historical financial information. This information allows a business valuator…
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The Perils of a Party Doing their Own Business Valuation in a Dissolution Action Kwak v. Bozarth is an unpublished Massachusetts case. The trial court made several decisions based on unavailable data. The case illustrates the perils of a party in a martial dissolution acting as their own expert and underscores the importance of how the standard of review affects an appellate panel’s review of the trial court decision. Valuation professionals often say that valuing privately owned businesses is a blend of science and judgment. Kwak v. Bozarth, 2023 Mass. App. Unpub. LEXIS 179; 102 Mass. App. Ct. 1116; 2023…
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June 2023 What happens when an owner pays him or herself a non-market rate of compensation? This month’s legal update presents, Mekhaya v. Eastland Food Corp., 287 A.3d 395; 2022 Md. App. LEXIS 938 (Md. Ct. App. December 22, 2022). In that case, an appellate court discusses what can happen when owners use their control prerogatives to pay owner employees more than a market rate for the services they provide to the organization. Owner managed privately held businesses can sometimes play fast and loose with characterizations of employment compensation and equity holder dividends/distributions. Tax preparers will sometimes raise concerns that…
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Nuances Valuing and Normalizing an Auto Dealership There are many reasons an auto dealership may require a business valuation; buy-sell agreements, shareholder disputes, employee stock ownership plans (ESOPs), and estate planning and gifting strategies. In many instances, there will be an opposing party that questions the validity of the final value, whether it be a dissenting stockholder or the Internal Revenue Service. It is imperative the dealer be aware of the basic characteristics of a valuation so the dealer is able to make sure the valuation analyst is using sound judgments and that, if challenged, the value will be defensible.