Fair Market Value

Fair Market Value is the price at which a willing seller and a willing buyer will complete the purchase of a business, both having equal and requisite knowledge of the business and neither being under any compulsion to buy or sell.  Fair market value is not the only measure of value of the business, but it is the price at which businesses commonly trade.  Other values you may have heard of are liquidation value, and a liquidation value can be both orderly or forced; and loan value.  The components of fair market value differ from business to business.  For instance, some businesses have significantly greater value in assets than others do.  Generally the fair market value will be driven by the financial statements and records of the business and should be the subject of proper valuation conducted by an independent third party at the request of the seller.