September 01, 2012

Reasonable Compensation

Kimberly Linebarger

 

From The Lawyer’s Business Valuation Handbook, Chapter 11

Often one of the largest adjustments in a business valuation is reasonable compensation. Reasonable compensation is a normalizing adjustment taken when a key employee or officer is found to be underpaid or overpaid. Some situations where the issue of reasonable compensation may be critical are when the key person is also a shareholder, when there is a family relationship between the payor and payee, and when personal versus enterprise goodwill is a concern.

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