Every business owner will face at least one situation requiring a professional valuation—the question isn't if, but when.
Court-mandated, regulatory, and statutory requirements where professional valuation is legally required.
IRS requirements, financial reporting standards, and tax planning scenarios requiring formal appraisals.
Business planning, transactions, and strategic decisions where valuation provides critical insights.
Courts typically require qualified, independent appraisers meeting jurisdiction-specific standards. The appraiser must demonstrate expertise in the industry and valuation methodology, and be able to withstand cross-examination.
Uniform Standards of Professional Appraisal Practice (USPAP) or other recognized professional standards may be required for certain litigation and regulated contexts
Appraiser must be independent from all parties with no financial interest in outcome
ASA, ABV, CVA, MAFF, or other recognized valuation credentials often required by courts and regulators
The National Association of Certified Valuators and Analysts (NACVA) maintains comprehensive Professional Standards that meet or exceed requirements for most valuation purposes. NACVA-credentialed analysts (CVA, MAFF) follow rigorous development and reporting standards ensuring defensible, ethical valuations.
Qualified appraisals meeting IRS requirements may provide penalty protection under IRC Section 6664(c)(3) if the valuation is later challenged, provided the taxpayer acted in good faith and relied on the professional appraisal.
The appropriate standard of value significantly impacts the conclusion and must align with the purpose
Credentialed valuators consider three approaches with professional judgment determining appropriate weighting:
Note: ASC 820 defines fair value differently than IRS fair market value. Professional judgment is required to select the appropriate standard for each engagement.
Quick reference guide for determining valuation requirements across different scenarios
Professional valuation standards mandate comprehensive documentation throughout the engagement. This isn't bureaucracy—it's your protection against challenges from the IRS, opposing parties, or regulatory bodies.
Inadequate documentation is one of the most common reasons valuations fail under scrutiny, even when the conclusion itself is reasonable. Professional standards require comprehensive documentation for defensibility.
Many professionals assume that internal calculations, broker opinions, or rule-of-thumb estimates will satisfy legal or regulatory requirements. This can lead to IRS penalties, court challenges, or regulatory violations.
Solution: Engage qualified appraisers for any legal, tax, or compliance-related valuation need.
Rushing valuation work leads to inadequate analysis, limited appraiser availability, higher costs, and increased risk of challenges. Complex valuations typically require 4-8 weeks, though extensive engagements may take longer.
Solution: Plan valuations well in advance of deadlines and key events.
Business values change rapidly due to market conditions, performance, and other factors. Using stale valuations for current transactions can result in significant over or underpayment and potential legal challenges.
Solution: Obtain current valuations for all transaction and compliance purposes.
Courts, the IRS, and regulatory agencies scrutinize appraiser qualifications carefully. Using appraisers without proper credentials, experience, or independence can invalidate the entire valuation.
Solution: Select credentialed appraisers (ASA, ABV, CVA, MAFF) with relevant industry experience and independence as defined by applicable professional standards.
Essential steps to take before engaging a business appraiser
Get expert guidance on your specific situation. Our comprehensive assessment will help you understand your valuation requirements, timeline, and next steps for compliance or strategic planning purposes.
Our NACVA-credentialed professionals ensure your valuation meets all applicable standards while providing practical, actionable insights for your business decisions.