Certified aviation business valuations & appraisals by Avicor Aviation

Reasons to Value My Aviation Business: Part III

✈ April 26, 2017, Avicor Aviation Inc.

Let's Review Reasons

Over the past two weeks, we have discussed five key reasons for knowing the value of your aviation business. To summarize, we have discussed the following:

  1. A valuation is a good way to set a realistic starting point for discussions with a potential buyer if you are planning to sell the business.
  2. Corporate and personal planning can be enhanced by knowing how much your business is worth.
  3. Valuing your aviation business can be a very useful tool when you approach bankers and financiers who do not always understand the aviation industry.
  4. A valuation of your aviation business can provide you with a read as to how you compare with other companies in the industry.
  5. Reviewing the worth of the business can identify areas in the business that can be improved to build the value of the business.

This week we will look at two more key reasons.

Reason 6: Ownership Changes

Throughout the life of a business, there can be a number of times when the ownership of the company changes. An existing partner may decide to leave to pursue other interests or investments. A new partner is added. Additional investment is required in order to expand the business. A divorce necessitates a division of ownership. Another business is acquired and its owner becomes part of your ownership group. The reasons are many and varied.

But each time there is a change in ownership, it is important to know what the value of the aviation business is. If a business has been growing for a number of years and a partner decides to leave, everyone will need to agree what the value of the business is in order to buy that partner out. If a new investor is to be added, they want to know what share they will receive for their investment, again necessitating an agreement on the value of the business. An independent valuation of the business allows for an unbiased determination of the company's worth. In fact, most well designed buy/sell and partnership agreements include a provision for an independent valuation f the company when such changes are about to take place.

Reason 7: Gifting the Business

Sometimes the change in the ownership of an aviation business is a transition between generations of a family. It may not involve a purchase, but rather a gift from parents to children, or between friends.

When a business, or shares in a business are gifted, whether it involves family members or not, the IRS requires that the fair market value of the company is determined by an independent party that is certified to carry out business valuations.. In fact, the valuation report is part of the documentation that the IRS requires along with other forms that must be filed. The independence of the valuator is an important part of its requirements. And the IRS requires that the valuator be certified.

Next week we will wrap up our series on key reasons to find out the value of your aviation business.

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