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Since there is no liquidity for the Limited Liability Company until it is sold or liquidated, therefore an LLC Valuation or Appraisal is often needed to determine the value. A Limited Liability Company Appraisal or Valuation is often required when computing a pension, profit sharing, or 401k plan participant distribution. It is also often required for Estate and Divorce Valuation purposes.
In a Limited Liability Company or LLC, the investment members most often have a fractional minority interest in the Limited Liability Company. The fractional minority interest of an LLC Appraisal or Valuation, should follow the guidelines set forth in IRS Revenue Ruling 59-60, and sometimes the financial accounting standard, FAS 157.
An LLC is a business organization, a company, with one or more members, who invest in the business, and but do not individually assume legal debts and obligations. As individual investment members they receive the cash flow or capital gains from their portion of the investment. One or more Limited Liability Company (LLC) members assume the management responsibilities, as the managing member(s).
Sheltering the individual limited liability members from legal liability has always been a major attraction for investors. However, the Limited Liability Company as an operating Company is not sheltered from liability. Except for a large publicly registered LLC, significant amounts of money can be raised without any significant registration as a security offering. This makes a Limited Liability Company a very cost effective vehicle for raising investment capital.
The IRS, Dept. of Labor, and most auditors will only accept Valuations computed, and documented with supporting exhibits, from an independent expert. Valuations from the investor, the investment management, and the investment management's accounting firm, are not acceptable to the above agencies.