Minority Discounting

Minority Discounting

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Minority Discounting

Minority Discounting definition:  Minority discounting is a valuation method which accounts for the lack of marketability and lack of control of interests in a family business.  When minority discounts are properly applied by an appraiser, family business interests can be transferred to heirs or gifted at lower estate and gift tax values. The interests in the family business are discounted to account for the recipients minority position (not able to control management or liquidation of the business) and smaller pool of available buyers for interests in a family business (often limited by bylaws to family members).  The discount can be substantial, providing large tax breaks.

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