By: Fredrick P. Niemann, Esq., a New Jersey Passing on Your Business Lawyer

The goal of any valuation of a New Jersey business is to best approximate the business’s actual fair market value. Fair market value has been defined as the agreed upon price at which your business will be sold and transferred between a willing buyer and seller, neither party being under any force or compulsion to buy or sell, and both with knowledge of all the relevant facts surrounding the business. Of course, where less than the entire ownership interest in a New Jersey business is being acquired, there are often discounts to reflect the lack of control or as they say, “lack of marketability”. Some of the more common business valuation methods in a stock purchase agreement are summarized below.

Book Value – This method, also known as the net asset value method, is based on the net worth (assets-liabilities) of a business on a company’s books and records for accounting purposes. While this method is easy and relatively inexpensive to ascertain, book values are based on historical-cost principles, which frequently become unrealistic over time, especially for assets such as real estate, patents, and goodwill. Some modifications of the book value method include the tangible book value method, which basically includes only assets, such as cash, inventory, equipment, and real estate. Economic book value would entail an appraiser in an effort to update the value of assets to their current market value.

Contact me personally today to discuss business valuation issues. I am easy to talk to, very approachable and can offer your practical, legal ways to handle your New Jersey business valuation concerns. You can reach me toll free at (855)376-5291 or email me at fniemann@hnlawfirm.com