The following question came up in the LinkedIn Business Valuation and Advisory Network group: “Is there a preferred method that any of you have for valuing LLCs and/or S Corps in divorce cases?”  Gregg Hamilton-Piercy (KLR & Co.) responded:

“As it relates to pass through entities in general, we typically tax affect all cash flows when valuing the company since our discount rate is derived using C corp data. In addition, we develop a pass through entity premium to account for the (perceived) tax benefits of being a pass through entity. More often than not, we use Nancy Fannon's pass through premium model to do this which usually results in a premium between 3%-6%.“

Learn more about Fannon’s (Fannon Valuation) approch at the upcoming BVR webinar “Pass Through Entity Valuation Update: The Significant Impact of Academic Research on the Debate” on May 26th. Two CPE credits are available.