Company, trust or partnership: what exactly is being valued?

Three things that get mixed up

Most requests start with “what is my business worth?” It is a fair question, but rarely the exact one. Before choosing a method, a valuer needs to know which of three things is being valued.

A sole trader is the simple case: no entity sits between owner and business, so the business itself is valued. Every other structure adds at least one legal layer, and that layer decides what the owner actually has to sell.

Enterprise value and equity value

Valuers usually start with the business. Enterprise value is what the operating business is worth on its own, typically on a cash-free, debt-free basis with a normal level of working capital. It is what buyers mean when they say a business sells for “so many times earnings”.

Equity value is what is left for the owners of the entity. The valuer bridges to it: deduct bank debt, equipment finance and loans owed to shareholders or related parties; add surplus cash and assets the business does not need to trade; adjust for working capital above or below normal, and for tax balances.

Note the shareholder loan. It reduces the value of the shares, but it is also an asset of the director who lent it, so it sits beside the shares, not inside them.

The last step, from a pro rata share to the value of one parcel, is where control and minority position come in. Our article on valuing a minority interest in a private company covers it.

A company: you own shares, not the business

A company is a separate legal person. It owns the business, the bank account and the vans. Shareholders own shares, which carry the rights in the constitution and any shareholders’ agreement, not a direct claim on the company’s assets. So the subject is usually a parcel of shares, and a valuer needs more than the financial statements:

• the share register, showing who holds what and in which class
• the constitution and any shareholders’ agreement, including pre-emption rights, drag and tag rights and any agreed valuation formula
• loan accounts with shareholders and related entities, and whether amounts owed to the company will be repaid
• any assets inside the company that are not part of the trading business

Share classes matter: two parcels of the same size can carry different voting, dividend or capital rights, and the price follows the rights.

For 30 June 2027, a company's own post-CGT assets are generally outside the transitional rule, because companies cannot use the 50% CGT discount (pre-CGT assets have their own reset). Shares held by individuals or trusts may be inside it. Our answer on whether a company needs a 30 June 2027 valuation explains how to check.

A unit trust: units, and what the deed says

In a unit trust, the trustee holds the business for the unitholders, and the unitholder’s asset is their units. Units usually carry a fixed share of income and capital in proportion to the number held, but the trust deed decides.

Deeds differ in ways that move value. Some let the trustee issue or redeem units at a price it sets, some create classes with different rights, and some sit beside a unitholders’ agreement with transfer limits or a valuation formula. The deed gets read before the units get valued.

A unit trust can raise the 30 June 2027 question at two levels. Its own CGT assets, such as goodwill, may be within the transitional rule, and so may the units held by individuals or family trusts. Whether one, both or neither needs a value is for your tax adviser, and the answer changes the scope.

A discretionary trust: nobody owns a slice

This structure causes the most confusion. In a discretionary or family trust, the trustee decides which beneficiaries receive income or capital, within the deed. Until it does, a beneficiary generally holds no fixed interest in the trust’s assets: a right to be considered and to proper administration, but not a percentage.

So the subject is usually what the trustee holds: the business the trust runs, or the shares, units or other assets it owns. For the 30 June 2027 rule, the trustee is the one treated as selling the trust’s assets; ask your adviser whether your own interest needs a value.

Where a trust runs a business directly, the CGT question at 30 June 2027 may centre on particular assets. Trading stock and most depreciating assets, such as plant and vehicles, are generally dealt with under other tax rules, which often leaves goodwill, plus any property, intellectual property or investments. Your tax adviser confirms the assets in scope.

Control is a separate matter. Being the appointor, or able to replace the trustee, does not usually create a fixed interest for tax purposes. Family law can view control of a trust differently, and those matters go to our dedicated family law practice, Family Law Valuations.

A partnership: each partner’s interest in each asset

A general partnership is not a separate legal entity. The partners own the business together, on the terms of their partnership agreement or, if there is none, the partnership law of their state or territory.

Tax law generally follows. For CGT, each partner is treated as holding an interest in each partnership asset, with a separate cost base for each, and capital gains are made by the partners individually. So the subject is usually a partner’s interest: their share of the goodwill and other assets, net of their share of the liabilities.

Agreements often set their own exit price, especially in professional practices: a formula, or nothing at all for goodwill. That price binds the partners between themselves, but it is not necessarily market value. Where market value is the question, a valuation names the interest being valued and the rights attached to it, and the agreement price is not the answer by itself.

Goodwill needs care too. Where clients follow a partner rather than the firm, part of the goodwill may be personal, and a buyer will not pay full value for something that can walk out the door.

Why the legal interest sets the scope and the fee

The subject sets the scope. Each extra entity or interest adds real work: another set of accounts, another set of rights, another bridge from enterprise value to equity.

Independent Business Valuation charges a fixed $999 + GST for a full valuation report on one business or ownership interest, where annual turnover is under $2 million or $2 million to $10 million. The fixed fee applies once we confirm the interest, purpose, structure and records fit the fixed-fee scope. Anything outside it is quoted in writing before we start. Each additional entity or interest is $795 + GST. Turnover over $10 million, groups of entities, several interests and disputes fall outside it.

Before you ask for a quote

1. 01Name the holderYou personally, your family trust, a company or a partnership. The share or unit register usually answers it.
2. 02Name the interestThe whole business, all or some of the shares, units, a partnership interest, or goodwill only.
3. 03Name the date and purpose30 June 2027 for CGT, a current date for a sale or buy-out, or another date. The purpose shapes how value is defined.
4. 04Gather the documentsConstitution, shareholders’ agreement, trust deed or partnership agreement, plus recent financial statements. Once you engage us, they come through the secure upload link on your matter, never by email.

Not sure which interest is in play? Say so in the quote form. Independent Business Valuation does not give tax or legal advice: whether you need a valuation at all, or could use the apportioning method once it is finalised (it is still a draft), is for your tax adviser.

A valuation as at 30 June 2027 is prepared after that date, once your records to 30 June 2027 are available. You can book your place now.