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There is a very wide variety of businesses that might fall under the heading of software companies. Generally, this title is reserved for companies whose primary focus is the development of computer programs for their own use or for use by others. There are several main categories: Custom software developers who design, code, test, and install software for clients. Software package developers who create, package, and sell software for use by many customers. This category includes developers of accounting software, computer games, apps for smartphones and tablets, computer utilities, etc. Computer system design services who design computer-based systems for specific purposes, and which may include computerRead More →

Intellectual Property (IP) includes patents, trade secrets, designs, trademarks, literary and artistic works, inventions, and other assets created by the mind. The most common IP assets we value are patents and their associated drawings and processes, although we often see IP that is still in development and may not be patented. IP valuations are most often performed when the IP is going to be sold or transferred offshore or when the owner is seeking investors to help commercialize the IP. The method most frequently used to value patents is called “Relief of Royalty.” This method requires estimating the royalties that would be paid or receivedRead More →

The term “Intangible Assets” includes a wide variety of assets such as patents and intellectual property, brand names, non-compete agreements, workforce in place, licenses, contracts with customers, or any other identifiable asset that is not physical in nature. Although these assets cannot be seen or touched, they can have significant value to their owner. For example, a strong brand name confers value in the form of higher prices, customer loyalty, and market acceptance, as compared to no-name products that may be otherwise similar or even superior. In our valuation work, intangible assets are most often of special interest when a business is sold. Intangible assetRead More →

A holding company is usually established to hold assets for investment purposes, in contrast with an operating business, which exists primarily to derive profits by selling some product or service. Holding companies typically hold real estate, marketable securities, or both, or sometimes other assets such as an art collection. Holding companies are usually organized in these forms: Limited Partnerships including Family Limited Partnerships (FLPs) LLCs General Partnerships Sub-S Holding Companies These forms of ownership provide tax advantages and also a great deal of flexibility in how the assets are managed and the benefits are distributed. They provide a means for the original asset holders toRead More →

Benjamin Franklin advised, “An ounce of prevention is worth a pound of cure.” And an estate tax audit is a potentially costly circumstance to be prevented if possible. When incorporating a business valuation in an estate tax filing, there are preventive measures to reduce the risk of audit selection. Tips for avoiding audit triggers: Discount conservatively.  If the valuation contains marketability and control discounts (as most do), the discounts should be within reason, and the report should provide support as to why the discount figures are appropriate. This will require reference to market data, and often some restraint on the part of the valuator. Support methodRead More →

Do I need a 409A valuation? If your private company is issuing stock options or any other form of deferred compensation to your employees, you must have an assessment of the fair market value of your business performed by a third-party valuation firm. This is in order to satisfy IRC Section 409A, which imposes severe penalties for compensation which is issued at any value other than the fair market value as of the grant date. 409A valuations are most commonly performed to assist companies with setting the strike price for grants of employee stock options. The valuation needs to be updated at least every 12Read More →

The Internal Revenue Service has signaled it intends to curtail the estate planning strategy of using partnerships and limited liability companies to pass a family business or securities to children at a discounted value. Catherine Hughes, Office of Tax Policy of the US Treasury Department, recently indicated at the American Bar Association Conference that proposed regulations under IRC Section 2704 will likely be introduced in the fall of 2015. These proposed regulations would limit the availability of lack of control and lack of marketability discounts for transfers of closely held interests among family members. Family limited partnerships and limited liability companies long have been usedRead More →