Equipment Appraisal Blog | Understanding Machinery Appraisals

What do you need to know to protect your interests in a dissolution?

Posted by Equipment Appraisal Services on Tue, Sep 19, 2017 @ 10:12 AM

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Let's face it - nobody gets excited about a dissolution. Whether it's your business, a partnership or a marriage, breaking up something that's worked well in the past can be a difficult and trying process. But instead of simply getting it over with, you may want to consider how to protect your interests before you lose out. Here's how to use an equipment appraisal to help document your assets in a way that will hold up well during negotiations and in legal circles.

What do you need to know to protect your interests in a dissolution?

We've all heard horror stories about how a dissolution can come out badly. Whether it's the businessman who lost the company Jaguar and computer lab while taking care of the employees or the divorced individual whose ex sold off all the equipment at a pittance, it's important to know what to do in these situations. Doing nothing will often leave you with nothing.

But what if you're not sure how much your assets are worth? As an example, an insulator in northern Minnesota was a handy sort. When he started his business, he had purchased a box van and installed a blower system for cellulose insulation. Because he had a keen eye for mechanical maintenance, the system was in excellent condition when, after many years in business and no takers to buy the company, he dissolved the business. The system had been fully depreciated many years before, yet it still retained excellent value because of the care it had received over the years.

On the books, the equipment had no value. In real life, it was worth quite a bit, especially when an enterprising sort from a few hundred miles away contacted him as the equipment sat in his empty warehouse. Years after the equipment had been purchased, the retired insulator ran into the young man who had purchased the machinery. "You know, I would have paid three times what you were asking for that equipment," the young man admitted.

This type of story is classic to any type of dissolution, but when two partners, either in business or marriage, dissolve a business, things can get ugly. If a divorce had been involved in the above case, the spouse could have come back and claimed the husband had intentionally gotten rid of the asset at a low price to avoid paying a fair share for the equipment during the dissolution.

When you have an equipment appraisal performed, you're able to provide documented evidence for the machinery's value. One party in the dissolution may claim equipment has a much higher or lower value to cause problems or get more out of the situation. The best way to resolve the issue is by having an independent third party determine the fair market value of the assets involved. This ensures that both parties get a fair shake out of the deal.

Dissolution is never fun, but it can be less painful if you take the time to protect your interests during the process. But don't expect your local equipment sales rep to provide you with a solid appraisal that will hold up in court! When you work with a certified equipment appraiser, you'll get a fair report of your equipment values that meets or exceeds legal requirements that won't be thrown out if things get ugly.

Tags: Equipment Appraisal, Divorce, dissolution

Before You Sign on the Dotted Line: Why Equipment Appraisal is Vital in a Divorce

Posted by Equipment Appraisal Services on Tue, Jun 07, 2016 @ 01:30 PM

He said, she said, they said - when it comes to dealing with a divorce, it's a very stressful time. The last thing you may be thinking about is getting equipment appraisals performed on your machinery assets. But when both parties are in a business together or if one party is contesting the divorce, you'll need to have a certified equipment appraiser take a look at what you have and prepare a report that will hold up in court. What's more, you'll need to have a particular type of machine appraisal performed to meet legal requirements. Confused? We'll help you figure it out. Here's what you need to know:

Before You Sign on the Dotted Line: Why Equipment Appraisal is Vital in a Divorce

Why Get a Certified Machinery Valuation?

A machinery valuation helps determine the value of equipment assets during a divorce. But what many people do not realize is that the type of appraisal is different depending on the situation. There are some legal restrictions, depending on your location, that control the type of appraisal that must be performed in a divorce. But beyond the type, you'll want to make sure your appraiser is certified. Why? Certification shows that the appraiser has been trained in standardized equipment appraisal techniques and types, ensuring they'll know how to apply the proper methodology to your equipment appraisal.

They'll also be a neutral party, providing a fair value for your equipment. If your appraisal report is not prepared by a certified equipment appraiser, it will almost certainly be contested or thrown out in court during proceedings. Even if your appraisal was performed by a certified machine appraiser, your spouse may choose to contest the report either out of an abundance of caution or out of spite to drag out the proceedings or force your hand in another area. In that situation, it's vital that you work with a certified machine appraiser who has experience as an expert witness.

What Type of Valuation Do You Need?

Beyond making sure that your equipment appraiser is certified, you may not realize that the law in some areas controls what type of appraisal can be used in divorce proceedings. Fair market value is typically used, with both parties agreeing to use the same independent certified appraiser. If one partner is pushing to get out of the business, fair market removal value may be used, which accounts for the cost of removing permanently-affixed machinery from a business location. In cases where both parties want to quickly leave the business and have the cash to start over, orderly liquidation or forced liquidation values may be used to speed the process along. Though this is relatively rare, it does show up in no-content divorces where neither party wants to retain an interest in the business. 

Though nobody wants to go through a divorce, knowing what's involved in deciding what to do with equipment assets can help a great deal. Remember, you'll want to work with a certified equipment appraiser to ensure your appraisal report will hold up in court and against legal scrutiny.

Tags: Divorce, divorce appraisal, fair market value

Metalworking Equipment Appraisal in Times of Company Change

Posted by Equipment Appraisal Services on Mon, Dec 21, 2015 @ 08:36 AM

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When your company is undergoing a change in ownership, you may already be having enough to do just keeping things going. But have you considered how a metalworking equipment appraisal can help? Here are some situations where getting a metalworking equipment appraisal done ahead of a serious change can help make things go more smoothly and with much less drama:

Bankruptcy

In a bankruptcy, you may be forced to liquidate your assets to pay some of your creditors, At this point, a machinery valuation is often based on liquidation values, either through an orderly liquidation, forced liquidation or liquidation in place. Having a machine appraisal completed by a qualified, certified machine appraiser helps ensure that you can sell the least amount of equipment to settle your debts, helping keep your company more intact than may otherwise be possible.

Divorce or Partnership Dissolution

Though this type of situation can also lead to asset liquidation, it's much more likely to be finished amicably if both sides know that a fair and logical process of determining equipment values has been followed. In this type of situation, the party getting out of the partnership will often want the highest possible valuation while the other party will want the lowest valuation in order to pay the least amount to keep the business solvent. Having a certified machine valuation specialist develop a quality report based on standardized methodologies helps ensure that both parties get a fair equipment value.

Corporation Restructuring

When certain laws went out of effect a few years back that were keeping C corporation taxes low, many businesses have begun considering changing their corporate structure to a pass-through organization such as an S corporation. If company equipment values have been inflated in the past or not properly depreciated, they could carry inaccurately high capital gains through the conversion process. In businesses where this has happened, the amount of capital gains often completely wipes out any potential tax savings that the company would otherwise have realized during the through the restructuring process.

Business Sale, Purchase or Merger

How would you like to go to the negotiating table with a tool that helps guarantee that you'll get a fair price for the company you're selling, buying or merging? Equipment appraisals help provide legal documentation to back up your asking price, but only when they're completed by a certified equipment appraiser. Because metalworking companies often have a lot of capital tied up in machinery value, knowing the exact fair value of that equipment is a very strong bargaining chip when negotiating a business ownership transaction.

Settling an Estate

When a business owner passes on, there can be a million tiny and not-so-tiny details to attend to, especially if the owner died unexpectedly. Because estate taxes can take a large chunk out of a business legacy, knowing exactly what the equipment is worth makes a big difference in how large a bite the IRS takes. If the business owner wished for donations of equipment to be made, a certified appraisal report must be filed with the proper IRS form to ensure the donation can be tax deductible.

By having a metalworking equipment appraisal already in place, you can avoid some of the hassles and headaches these situations may create. If you haven't had a chance to have a quality machinery and equipment appraisal performed by a certified machine appraiser, why not take the opportunity to do so now? At Equipment Appraisal Services, our highly-qualified equipment appraisers are ready to help at any time. Please contact us today with any questions or to schedule an appointment with an equipment appraiser.

Tags: Divorce, bankruptcy, selling a company, metalworking equipment appraisal

What Happens in a Business Dissolution or Divorce?

Posted by Equipment Appraisal Services on Mon, Aug 31, 2015 @ 10:00 AM

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Whether it's retirement or a partner leaving a business, dissolution can be a very confusing process. How do you get a fair value from the assets and, in the case of a partner leaving, decide on a fair price for the leaving partner's share? Let's take a good look at the dissolution process and how having equipment appraisals completed can help make that process go more easily for all concerned.

What happens in a dissolution?

Though dissolution can be very different based on your company's structure and policies, they usually follow the same basic steps:

  1. The decision to close or leave the company is made. For a sole proprietor, this can be as simple as making a decision, but in a partnership, LLC or corporation, it can be much more complicated. A partnership may require a meeting to discuss how the leaving partner needs to hand off existing clients and be compensated for their part of the company, typically using equipment appraisers to ensure that the machine valuation reflects the proper values. An LLC or corporation often requires a meeting with the shareholders to approve a resolution to dissolve, usually by following the procedure outlined in the bylaws.
  2. File dissolution forms with the state. Depending on your state's requirements, this step may either fall at this point or after taxes have been taken care of. Usually filed as a Certificate of Dissolution, talking to your state's Secretary of State office is a good starting point to gather details on what needs to be done.
  3. Cancel any licenses, permits and fictitious names.  If you've needed to pick up any regulatory documentation, you'll want to cancel them, because you can be charged for renewals if you fail to cancel these items. Cancelling a fictitious name, such as a DBA, protects you from liability if someone else does business under that name after you've dissolved your business.
  4. File taxes.  You'll have local, state and federal taxes to file. Many states require proof that your tax burden has been finished before they'll dissolve your business, often in the form of a tax clearance of verification of good standing. Don't forget payroll deductions and sales tax returns while you're working on closing taxes.
  5. Settle creditors' claims. Any companies or agencies you owe money to should be settled prior to the dissolution. If needs be, this can be accomplished by selling some assets following a machinery and equipment appraisal by a qualified equipment appraiser.
  6. Distribute any remaining assets.  This can be the hardest one, especially if the company doesn't close, such as in a divorce or when a partner leaves, and is the best time to have a machinery valuation or machine appraisal performed. Because the company is being continued after the change, the person retaining the business will want a low equipment value because they must buy out the other partner to continue, while the individual who is leaving wants higher equipment values as they are being bought out. Bringing in a qualified machine appraiser accredited by the American Society of Appraisers using the Uniform Standards of Professional Appraisal Practice can often help solve this dilemma, because they are required to appraise the remaining assets at a fair market value that doesn't favor one side or the other, though if all parties agree, a liquidation appraisal can be used.

Closing or leaving a business through dissolution can be a difficult time for all involved, but by following the steps one at a time and using the services of a professional, such as your registered agent or a qualified appraiser, it can be much easier. Your Secretary of State, the IRS and the Small Business Administration are other alternatives for information on dissolving your business.

Tags: Equipment Appraisal, Divorce, dissolution

Equipment Appraisals for Divorce Litigation Purposes

Posted by Equipment Appraisal Services on Sun, Jan 05, 2014 @ 07:18 PM

equipment appraisal divorce litigation resized 600Business assets are treated much the same way as personal assets when going through a divorce.  An equipment appraisal will be necessary to determine the fair market value of the equipment.  When dividing assets there needs to be a method for determining what value you are dividing with your spouse. The court accepted method is to have an appraisal of the business assets completed by a certified appraiser, which will establish what value will be used when distributing the assets. An equipment appraisal will be a means of proving the true value of the tangible assets and provide a solution to conflicts that may arise.
 
An appraiser will gather information about the equipment at the business in much the same manner real-estate appraisers record information to be used in determining the value of your home.   The appraiser will go to the business location(s) and record make, model, serial numbers, as well as condition of all items to be appraised.  This information along with a series of pictures taken of the equipment will be used to research and determine a current fair market value.  At times, the appraiser will also need to determine orderly liquidation and/or forced liquidation value.
 
All relevant parties can mutually agree to use a single equipment appraiser or work with separate appraisal companies.
 
Parties need to be careful on the appraiser that they select for the valuation.  If the appraiser is not a certified appraiser conducting the research and report under the Uniform Standards of Professional Appraisal Practice (USPAP), there may be a number of flaws in the courts eyes.  If the appraiser is a dealer with the ethical requirements of reporting unbiased opinions of value, then the opposing attorney will have a field day during cross examination.  Also, if the appraiser does not have experience in testifying in court, then there is the possibility that they will not maintain their cool or provide thorough responses to questions about their work.  Though experienced and credentialed equipment appraisers who provide expert witness services will often be more expensive than others, their fee is typically a fraction of the overall value of the business assets.  As the saying goes, you typically get what you pay for.

Tags: Equipment Appraisal, Divorce, Litigation, Expert Witness