Valuing shares in Ltd company

[BlasterBates]

Valuing the shares of the company is quite simple. Just calculate your average expected current profit and then multiply by the p/e ratio of the average of other companies in the same sector.

Presuming your company has no growth and taking into account the riskiness of the company I would guess a p/e ratio of between 6 and 10.

i.e. if your profit is around 10,000 assume the value between 60 and 100 grand.

[WordIsBond]

Growing business or not? How stable is the income stream? How much does continued success rely on your personal involvement?

Profit is one factor, but if you are primarily compensated via dividends, profit is overstated -- it should be calculated based on what profit would be if you were paid in salary.

A company with marginal profit and high revenues is generally considered to be worth a lot more than a company with small revenues and the same profit. You've got more to work with to leverage the thing into better profit.

Are there any substantive assets?

You could talk to these people or use their calculator: https://www.company-valuation-servic...SAAEgKkzfD_BwE

Try google for business valuation or valuing a business, or pricing a business. Read the articles. Play with the calculators.

Do you want the price to be low to make it easy for family to buy shares, or high to maximise your take? Because there is no such thing as a "right" price for a business, because no one knows the future. The only real thing you can do is get a range of prices. And you can also tweak what you enter in an online calculator to move the range in the direction you want. There are enough uncertainties in business that you can honestly have a range of answers on some of the questions, and how you answer moves the needle.

If you are looking for a lower price, then find the calculator that lets you honestly but pessimistically arrive at the lowest price, print the results, and save them if HMRC ever comes asking.

You can give shares to your adult kids, you know, as long as the income is theirs and never comes back to you, and you don't die too soon. If you do this, and the tax hit would be significant if you die, you might want to take out a 7 year life insurance policy with them as the beneficiaries to cover it.

[starstruck]

Thanks all.

[TheCyclingProgrammer]

When I needed to do this (to prove there were no CGT issues over a share transfer), my accountant arranged for a specialist to prepare a company valuation for a fee. It wasn't outrageously expensive, but it makes it much harder for HMRC to dispute it if you can show you've done the due diligence and not just plucked a number from thin air.