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We have distilled decades of experience at the intersection of law, business and finance into a suite of articles to help our clients make sense of business valuation, forensic accounting, and litigation support. Please visit our site regularly for our latest content.

Weighting Different Methods To Determine Value

Posted in Business Valuation, on Sep 2016, By: Mark S. Gottlieb

Unity Technologies, a previously nondescript software development company, has grown significantly in value over the past few months with the release of the viral mobile app, Pokémon Go, which was created using Unity’s software. The company has recently been valued at around $1.5 billion. This consensus comes from an amalgamation of different data including the company’s past financial performance, trends in the market, and the company’s owned resources. In performing this or any other valuation one needs to decide the relevancy of each type of data. For instance, Unity’s past performance may be a good prediction of the company’s potential but does not account for the growing market for programs that produce augmented reality, an area in which Unity specializes. These considerations are an important aspect of business valuation. In a typical business valuation, the analyst will often use three general valuation approaches: (1) the income approach, (2) the market approach, and (3) the asset approach. Each of these approaches uses different data to estimate the value of the subject company, which inevitably results in slight disparities between the outcomes. In order to come to a consensus on value, the analyst must decide how to weight each outcome. There is no official formula for calculating weights in business valuation. In fact, Revenue Ruling 59-60 of the Internal Revenue Code states: “Because valuations cannot be made on the basis of a prescribed formula, there is no means whereby the various applicable factors in a particular case can be assigned mathematical weights in […]


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Discretionary Expenses in Business Valuations

Posted in Business Valuation, on Jun 2016, By: Mark S. Gottlieb

(Reading time: Under 2 minutes) In an episode of the critically acclaimed sitcom, Arrested Development, aspiring magician and underachieving employee of the Bluth family business, G.O.B Bluth, tells his brother, Michael, “I figured out a way to make money while I’m working.” Michael, the work-oriented and responsible Bluth brother, replies, “But that is what we call working.” G.O.B. rarely performs work that adds to the value of the business, but, as a member of the Bluth family and officer of the Bluth Company, he is on the company payroll. His salary is an example of a discretionary expense that can affect the understanding of the company’s value. Business owners typically have a fair amount of flexibility to choose how they compensate themselves and their officers. The IRS mandates that the officers of a corporation, including the CEO, president, vice president, and any other shareholder employees, must be paid a “reasonable compensation” for their labor, but what qualifies as “reasonable” is left unclear. Depending on the nature of the business in question, there could be many factors that affect the level of compensation chosen for the business’s shareholders, including the following: When possible, companies tend to pay their officers wages that reduce taxes. For example, a C corporation might increase their shareholder’s compensation, and eliminate dividends, to avoid double taxation, while an S corporation might decrease their shareholder’s compensation in order to reduce payroll taxes. The shareholders may be receiving deferred compensation that was earned in previous years when the company […]


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It is often assumed that a business valuation is only necessary in instances of conflict or litigation, but business valuations can be very useful in identifying ways to increase the value of an existing business. When business owners get valuations, they are often surprised by the lower-than-anticipated results as it is easy to overvalue personal assets and lose sight of the fact that market value is based almost exclusively on objective data regarding future profitability. It is essential that business owners have an accurate knowledge of their businesses value in order to be in a position to increase its worth. A business valuation expert would be able to provide an exact valuation and help the business owner develop a long term plan to increase the business’s market value.  The specifics of this plan would be dependent on the company’s position in the marketplace as well as its financial growth history. There are a few basic techniques that typically work to increase a business’s value. You may want to consider one or more of the following: Increase Profitability. Look at the future prospects in the market and work to ensure that profits will continue increasing, Find efficiencies that cut cost, Grow intangible assets, Establish sales and/or marketing departments, Increase employee retention, and/or Diversify revenue by producing a larger variety of products or services. Simplify. Establish seamless procedures and routines, Create recurring revenue statements, and/or Reduce or eliminate shareholders loans. Organize. Tidy up the business’s physical location, and/or Neatly catalog important documents. […]


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Dealing with Fraud: A Simple Four Step System

Posted in Financial Advisory, on Apr 2016, By: Mark S. Gottlieb

Modern day examples of fraud don’t always take the form of mustachioed Ponzi-types with elaborate systems of deception. Today, elusive acts of fraud in the workplace are running rampant, especially throughout small businesses.   The ability to commit and get away with fraud has become even more accessible with the increased use of social technologies in the workplace. Tech savvy fraudsters can use anything from Facebook messaging to Snapchat to communicate plans for manipulating company funds in a way that is difficult to detect. If you or your client is suspicious of fraudulent activity in the workplace, it is essential to take the steps necessary to resolve the issue as quickly as possible. The following four steps should be taken to stop any potential fraudulent behaviors: Detection of Potential Fraudulent Activity in the Workplace The two main types of business fraud are (1) inappropriate personal use of business assets and (2) falsifying financial statements. These types of fraud can come in many forms, including but not limited to the following: Embezzlement, Forgery of official documents, Tampering with bank records, Inventory theft, Benefitting from placing a redundant order, Using company credit cards for personal expenses, Selling business assets under the market value, Manipulating the overtime periods, and Creating fictitious expenses and obtaining disbursements. If any of these behaviors are suspected, it is important to investigate. Forensic Investigation Although most employers wouldn’t like to think of their employees as the type to commit fraud, fraudulent behavior is surprisingly prevalent, especially among smaller […]


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Valuing Covenants Not to Compete

Posted in Business Valuation, on Feb 2016, By: Mark S. Gottlieb

The guest on Thursday’s episode of The Daily Show, Airbnb CEO Brian Chesky, explained that value in the American economy is becoming less associated with ownership and more associated with experience. Airbnb has revolutionized travel and hospitality by allowing users to pay to stay in the homes of other users, rather than in hotels. Trevor Noah, the host of The Daily Show, joked that Airbnb and other similar organizations are making ownership obsolete: people no longer need to purchase cars, homes, or, now, pay for hotels. In a serious tone, Chesky explained that this decline in ownership came with an increase in the value of experience. He said that a person’s value is now shown through their Instagram feed rather than the size of their house or worth of their car. Though this shift in value may signify a change in economic ideology, intangible assets, such as experience, have long accounted for a surprisingly substantial amount of a company’s total value. A company’s intangible assets bring value to the business without having a material presence. Essentially, intangibles come from employees’ experiences. Types of Intangible Assets Intangible assets fall under 5 major categories. The following lists these categories and examples of each: Marketing-related intangible assets    Trademarks,    Logos, and    Domain Names. Consumer-related intangible assets    Customer information, and    Customer relationships. Artistic-related intangible assets    Literary/musical/visual art works, and    Performance events. Contract-based intangible assets    Use rights,    Licensing agreements,    Franchise agreements, and    Employment contracts. Technology-based intangible […]


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Mark S. Gottlieb, CPA, Launches New Website

Posted in News, on Sep 2015, By: Mark S. Gottlieb

Mark S. Gottlieb, CPA, a premier business valuation, forensic accounting, and litigation support firm, recently launched a new custom website.


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Types of Fraud in Business

Posted in Financial Advisory, on Apr 2015, By: Mark S. Gottlieb

Under former Attorney General Eric Holder’s leadership, the US Justice Department drastically increased its fight against fraud, bringing in more than $24 billion in penalties. This substantial sum came mainly from the department’s pursuit of big banks for financial misconduct. Yet it also increased its crackdown on smaller instances of fraud. Fraud is prevalent in many facets of life, particularly within businesses. This swindling can come in many forms and eats away at a business’s funds. According to the Association of Certified Fraud Examiners (ACFE), on average, businesses lose 5% of revenue each year to fraud. Additionally, 22% of the cases examined by the ACFE involved losses of at least $1 million. Therefore business owners, attorneys, and investigators should know what types of fraud occur, how to look for them, and how to prevent them. Asset Misappropriation Fraud  To put it plainly, asset misappropriation takes place when someone steals funds from his employer. Asset misappropriation constitutes the most common type of fraud affecting businesses. What follows is a list of the most commonly encountered forms of asset misappropriation, ways to discover them, and methods of prevention. Authorized Maker An authorized maker is a person with the power to create and sign checks for a company. In this scheme, the authorized maker creates a check payable to himself, or one that pays his expenses, later altering the payee name in the accounting records to make the disbursement look like it was made to an authentic vendor. This scheme can be recognized […]


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Hidden Taxes in Divorce

Posted in Divorce & Matrimony, on Feb 2015, By: Mark S. Gottlieb

When the CEO of Continental Resources, Harold Hamm, divorced from his wife, Forbes published an article about the possible tax consequences. The settlement ordered Hamm to pay his former wife $995.5 million. Forbes asked the obvious question: with this kind of hefty transaction, the tax man must surely get his share, right? Not quite. According to law, transfers of property between spouses during a divorce are virtually tax free. Good news for the Hamms. However, there are often unseen tax burdens later on. Code § 1041 of the U.S. Internal Revenue Code lays out the rules for the taxation of marital property when it is transferred between spouses. Within the code, the “General Rule” states: “No gain or loss shall be recognized on a transfer of property” between spouses or former spouses.  One can assume that during a matrimonial case, there are no worries over taxes involved in transferring property. In many cases, this is true. But there are some important things to consider before dividing marital assets. Below is an outline of some of the major issues that may cause tax consequences. For a more in-depth discussion of these issues, please follow the link at the bottom of this post to read our whitepaper. Carryover Basis Carryover basis is a method used to determine the tax basis of an asset when it has been transferred from one individual to another. In a divorce, the spouse that receives an asset also takes the carryover basis of the asset. Because the […]


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Perhaps the most expensive divorce in history occurred when Russian billionaire Dmitry Rybolovlev was ordered to pay $4.5 billion to his ex-wife Elena. One of the charges Elena made against her husband was that he had attempted to hide assets in property bought hastily before his divorce. Even in cases where there is less money at stake, an attorney needs help in going through these financial matters. That is where the aid of a forensic accountant comes in. Below are five surprising services a forensic expert can offer during a matrimonial dispute. Preparation of a Net-Worth Statement  A Net-Worth Statement is a detailed account of a person’s assets, liabilities, income, and expenses. The net of the assets and liabilities are often referred to as the net material asset. Assets can include: cash, investments, and property. Liabilities include mortgages and debt. Income can be wages, interest, and business income. And expenses include housing, food, and education. This seems rather straightforward. However, it can often be difficult to find accurate totals or hidden income. However, a forensic accountant has special training to not only investigate and find assets and liabilities, but also the ability to properly calculate the total net worth and determine the parties’ true and constructive income. Back-of-Envelope Analysis of Valuation of Business Because a business may be considered a marital asset, it must be accurately valuated when undergoing a matrimonial dispute. One method that can be used to begin valuating a business is a back-of-envelop analysis. This form of […]


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Estate Tax Strategies for Second Marriages

Posted in Divorce & Matrimony, on Feb 2015, By: Mark S. Gottlieb

Second marriages are not only for Hollywood celebrities like Brad Pitt or Reese Witherspoon. According to the Pew Research Center, 40 percent of marriages today are second marriages. Often second marriages face many complications. Whether it is the terms of a prior divorce, finding a way to harmonize their two career paths, or children from a previous marriage, the situation can become very complex. A necessary thing to consider during a second marriage is estate planning. Usually, in a first marriage, the estate planning is straight forward. However, in a second marriage, especially one with children, this becomes complex. You want to provide for both your new spouse and your children from your first marriage, and you would like to do so with the least amount of tax impact on your estate. The good news is there are ways to reduce the tax effects a second marriage can have on your estate, and by taking some steps, you can secure the most benefits for your family when you pass. Estate Tax According to the Internal Revenue Service, the Estate Tax is “a tax on your right to transfer property at your death […] It consists of an accounting of everything you own or have certain interests in at the date of death.” This can include savings, property, investments, and business interests. It is important to remember that this estimation is not based on what the value of the assets and property were when you acquired them, but rather their current […]


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