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Caring For Generations

Strategic Business Planning Requires Annual “Check-Ups”

by | May 8, 2024 | advisors, business planning, charitable estate planning, estate and tax planning, estate planning in Indiana


In forming a business, it’s important to begin with the end in mind. At Geyer Law, where, for the past 25 years, our attorneys have been helping entrepreneurs start, buy, and sell businesses, we know there are important choices to be made at each stage of the process.  For today’s blog post, we interviewed David H. Hern, CPA, ASA, CEPA of Sofer Advisors.

The Journal of Accountancy notes, “One purpose of fixing a value on an interest in a closely held business is to determine gift and estate tax liability.”  But business valuation, the authors observe, is far from an exact science.  Often there is no identifiable market for the business interest, and the uncertainty can cause unintended gift or estate tax consequences.  As Indiana estate planning attorneys, we certainly agree that it takes planning to avert such unintended results.

Most business owners seek out a business valuation professional for an immediate, “tactical” need, David Hern relates.  The “trigger” might be a divorce, a lawsuit, a contemplated charitable gift, an employee stock award, an acquisition, or a partner buy-out/buy-in.  In fact, enabling organizations to determine their enterprise value is important for both financial reporting and tax compliance in a variety of business and personal situations. In the same way as failing to have regular health checkups is a mistake for individuals, waiting to do a business valuation until the need is imminent can turn out to be the most dire of mistakes.

Owners should, indeed must, Hern emphasizes, have the transferable value of their business assessed each and every year, with the initial valuation setting a baseline for strategic planning moving into the future. 

From an estate planning standpoint, up-to-date business valuations represent the proverbial “ounce of prevention” worth a “pound of cures”. As Steve Parrish notes in Forbes, “Leaving the disposition of your business and its assets to the probate court is like leaving your kids with an unknown babysitter.  You get what you get.”

Even entrepreneurs who envision continuing to run their businesses until their last day on earth know the day will inevitably arrive when their business will change hands in some manner.  Truth is, whether you own a small family business or a large corporation, it’s never too soon to give thought to business succession planning or exit planning. At some point, the founders or current owners of any business will be exiting, either by choice (through retirement or to move on to other endeavors) or because they are forced by incapacity or death to exit the business. One question our Geyer Law attorneys discuss at length with clients is whether the transfers of control will take place as gifts or through a sale.  In either case, business valuation will be at the core of the process.

While one-time business valuations may be sufficient for tactical needs, David Hern reminds business owners, strategic planning requires annual check-ups!

 – by Ronnie of the Rebecca W. Geyer blog team

 David Hern is founder and CEO of Sofer® Advisors, LLC, with offices in Atlanta, Nashville,Orlando, Toronto, Louisville, and Monmouth Junction.  For further information, contact [email protected].