Litigating Business Issues Often Requires Valuing the Business
When fighting over business ownership issues, the question of damages often revolves around the value of the business. If you have been swindled out of your 25% interest in the company, how much can you sue for? Clearly, it is a question of what 25% of the company is worth. This means that expert witnesses skilled in business appraisal and valuation will be needed to determine the correct value to place on your loss. It is harder than you think, and many issues come immediately into play. We litigate these issues and have the experts necessary to determine a credible and defensible valuation. Call us.
If you are a minority shareholder or interest-holder, whether it is an LLC, corporation, partnership or other business format, the value of your interest will be reduced by several annoying factors. Consider the following carefully, and you'll see what we mean.
The Minority Discount
If you do not have a controlling or majority interest, you are at the mercy of those who control the company. Your share of net income, your access to salaries and perks, and a host of other things, are beyond your control. This reduces the value of your interest, and such reduction is commonly called the minority interest discount. The value of your share is discounted, somewhat, by the fact that you are not the majority owner.
The Marketability Discount
The Marketability Discount arises when your ownership stake is really hard to sell. If you own a publicly traded company, you can sell anytime by simply selling your shares on stock market. But if your company is a private company with restrictions on the sale of shares, it may be hard, if not impossible, to actually find any third party buyer for your shares. The value of an item which has no buyers is zero. So as you can imagine, lack of marketability of your interests can result in a reduction of the appraised value. This is the marketability discount.