Valuing the Closely Held Firm

Valuing the Closely Held Firm

by Robert Kleiman

Sometime during the life of every closely held business, the owner must plan for the eventual transition of ownership and control of the firm.To make correct decisions regarding the transfer of ownership interests in the business, the owner must be able to determine the appropriate value of the firm.Other reasons for valuing the closely held firm include:

  • realignment of operating units;
  • establishing the value of a company considering an initial public offering;
  • the establishment of stock benefit plans; and
  • determining estate and gift taxes.

In a closely held business, the stock is owned by family members or a small group of individuals.Generally, no shares are in the hands of the general public.Accordingly, establishing a market value for the firm is a difficult and complex process. More…