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N Cal Attorney
N Cal Attorney, Attorney
Category: Business Law
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Experience:  Since 1983
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An SCorp issues a note payable for the buyout of one of its

Customer Question

An SCorp issues a note payable for the buyout of one of its shareholder 1 in 2013. In 2016, should the balance of this note payable reduce the cash basis book value of the Scorp in determining the buyout of Shareholder 2 who is now having the Scorp buyout his shares?
Submitted: 10 months ago.
Category: Business Law
Expert:  N Cal Attorney replied 10 months ago.

Thank you for your question.

The value of the corporation has to take that liability into account. If it is not a current liability it would be taken to be the present value of the future payments.

Payments to be made in the future are usually discounted to present value when making a balance sheet, but with interest rates so low, it would not be discounted by a lot.

"Book value is also the net asset value of a company, calculated as total assets minus intangible assets (patents, goodwill) and liabilities."

I hope this information is helpful.