Many business owners think of valuations only when they’re ready to sell – but there are several crucial times when knowing your company’s worth is necessary. Here are six key moments when a professional business valuation is essential or required.

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1. Selling Your Business or Exit Planning

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Whether you're considering selling now or in the future, a valuation helps you set the right asking price, attract serious buyers, and maximize your business’s worth. If you're planning to transition ownership – whether passing the business to family, selling to employees, or merging with another company – a valuation ensures a smooth transition and fair compensation.

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2. Bringing in Investors or Parting Ways with a Partner

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If you’re seeking outside investors or bringing in a new business partner, they’ll want to know exactly what the company is worth before investing. And you, in turn, will want to be fairly compensated for the value of the business you have built. Alternatively, if you are buying out an existing shareholder, both of you will want to obtain and agree upon a professionally calculated value for the company, whether you retain a neutral appraiser or each of you gets their own advisory team. In either scenario, a professional valuation builds confidence and facilitates fair negotiations.

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3. Securing Loans or Financing

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Banks and lenders often require a valuation to assess your company’s financial health before approving business loans. A clear, well-documented valuation increases your chances of securing favorable financing.

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4. Divorce and Legal Disputes

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Valuations are often required in cases of divorce or shareholder disputes. In many cases, if parties cannot agree to a mutually acceptable settlement, the court will require the business owner to obtain a professional fair market value valuation for his or her business interests in the business. Sometimes, the court will appoint a neutral appraiser if both parties agree to it. If not, each party will retain their own valuation expert, and the experts will have to come up with an agreement or defend their valuations in court.

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5. Estate and Gift Planning

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For purposes of settling an estate which holds interests in a business, a professional business valuation of the subject interests is often required. Alternatively, if estate and gift planning is done in advance, and business interests are gifted or transferred to an individual or a trust, a professional qualified appraisal is often required to be performed and attached to the appropriate tax forms.

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6. Section 409A Compliance

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When you are growing a company, sometimes you might consider offering stock options to employees as a part of compensation. In this case it is necessary to obtain a valuation of the stock in the company for Section 409A compliance. It is important to keep in mind that most valuations performed for 409A compliance purposes are not considered a “Qualified Appraisal”, and do not qualify for estate and gift planning purposes. In other words, if you are obtaining a stock valuation for 409A compliance purposes, you should not use the same valuation report for estate or gift planning purposes. We will explain in detail why this is the case in our future blog posts.

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Final Thoughts

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A business valuation isn’t just for when you’re selling—it’s a strategic and compliance tool for making financial decisions at critical moments. If any of these situations apply to you, it’s time to explore your options and secure an appropriate business appraisal done by a qualified appraiser. We will explain in detail what terms “Qualified Appraisal” and “Qualified Appraiser” stand for and why it is important to know the difference, in our future blog posts.