--- title: "Business valuation: Definition and Sources | Tax Glossary" description: "A business valuation is an estimate of what a business is worth, often based on fair market value, used for a sale, buy-out, gift or estate." url: https://wallacecpa.multisites.ai/glossary/business-valuation publisher: Wallace CPA phone: +1-877-682-1171 quote: https://wallacecpa.multisites.ai/contact --- Planning # Business valuation A business valuation is an estimate of what a business is worth, often based on fair market value, used for a sale, buy-out, gift or estate. A valuation puts a dollar figure on a business. Owners need one when they sell, bring in a partner, plan succession or deal with an estate. Many valuations use fair market value, which the IRS describes for donated property as the price that would sell on the open market between a willing buyer and a willing seller. A valuer reviews financial statements, such as the [balance sheet](https://wallacecpa.multisites.ai/glossary/balance-sheet) and [profit and loss statement](https://wallacecpa.multisites.ai/glossary/profit-and-loss-statement), plus earnings and risk. The result is an estimate, not a sale price. The figure can also set the tax on a sale, as in [capital gains](https://wallacecpa.multisites.ai/glossary/capital-gains). See the [valuation section](https://wallacecpa.multisites.ai/services/business-advisory#valuation) of the business advisory page. [Wallace CPA can helpBusiness advisory](https://wallacecpa.multisites.ai/services/business-advisory) ## Related terms - [Balance sheet](https://wallacecpa.multisites.ai/glossary/balance-sheet) - [Profit and loss statement](https://wallacecpa.multisites.ai/glossary/profit-and-loss-statement) - [Capital gains](https://wallacecpa.multisites.ai/glossary/capital-gains) - [Cost basis](https://wallacecpa.multisites.ai/glossary/cost-basis) ## Sources 1. [IRS: Publication 561, Determining the value of donated property](https://www.irs.gov/publications/p561) ## Talk to Wallace CPA Call the Southlake office and say what you need: a return, an IRS letter, your books or a new business. Have the notice or last year's return nearby if you have one. [Call (877) 682-1171](tel:+1-877-682-1171)[Send a message](https://wallacecpa.multisites.ai/contact) 180 State Street, Suite 225, Southlake, TX 76092