Faulty Business Valuation/Succession Plan

A business owner of a thriving heavy machinery company decided he needed a succession plan. His goal was to leave the business to his eldest son, entitling his other son to the remainder of the assets. The owner’s long-time CPA prepared a business valuation and advised him on succession planning.

After the business owner passed away, the eldest son quickly ran the business into bankruptcy. This son then sued the CPA for a number of claims, including a faulty business valuation.  A retained expert confirmed that the CPA’s valuation met the standard of care. Nonetheless, the opposing side’s expert was highly critical, causing the CPA concern about a negative verdict in excess of his modest limits of liability. The case settled prior to trial, but not until after the CPA accrued considerable legal expenses.

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