You will be required to submit an independent business valuation if you are seeking funding from a private investor or bank. The IRS requires filing of form 8594, "Asset Acquisition Statement" by both the buyer and seller of a group of assets that make up a trade or business when goodwill or going concern value attaches or could attach, to such assets and also when the buyer's basis in the assets is determined only by the amount paid for the assets. (IRC§ 1060(b).

When the assets of a business are sold, the manner in which the purchase price is allocated among various assets can significantly affect the tax consequences of the transaction. If the sale occurs when capital gains tax rates are significantly lower than ordinary income tax rates, for example, the seller will want more of the price allocated to capital assets such as goodwill and less allocated to ordinary income-producing assets. The buyer will want the opposite allocation. An independent business valuation may minimize disputes between the buyer and seller as well as with the IRS.


It is prudent for business owners to enter into a buy-sell agreement while they are still living to reduce the possibility that the IRS will include his/her business interest in the gross estate at a value that exceeds the price at which it is actually sold to a new buyer. Goodwin Financial can help you design a buy-sell arrangement.


For more information, please visit our section on Buy-Sell Agreements
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