To value equity compensation option choices. You’ll need your business valuation to price the equity and/or stock options you issue as part of your compensation packages if you’re a young startup company. to finance.
For loans or refinancing, creditors and banks will need to know how much your business is worth. Before deciding to support you, potential investors will require a firm understanding of the fundamental value of your business. Some loans depend on other considerations, like the history of sales revenue, rather than the confirmation of a business.
In the event that ownership changes, the government could need to know how much your company is worth. For instance, if you sell your company for less than it is worth, the Internal Revenue Service (IRS) may assess a gift tax on you based on how it values your company. A business valuation may also be required if you want to leave your company as a gift or file an estate tax return.