How to value a business in the event of inheritance

In the context of estate evaluation, the presence of a business—or a stake in one, in the case of a company—previously owned by the deceased (de cuius) is particularly significant.

Two main scenarios can be distinguished:

1. The deceased was the owner of a sole proprietorship or a partner in a partnership.
2. The deceased held shares in a corporation (limited liability company).

The key difference between these two scenarios lies in the applicable liability regime for company debts.

In the first case—sole proprietorship or partnership—the liability for business debts is unlimited. This means that if the business assets do not cover the outstanding debts, the partners (or the sole proprietor) are personally liable with all their current and future personal assets.

As a result, business debts will be included in the estate assets and liabilities to be inherited.

For an accurate business valuation, it is strongly recommended to appoint a qualified professional—typically a chartered accountant or estate attorney—who will assess the market value of the business, taking into account both assets and liabilities. Common valuation methods include:

• the asset-based approach,
• the income approach, and
• the discounted cash flow method (DCF).

However, the chosen method may vary based on current and projected turnover, growth potential, and the specific needs of the heirs. Relevant valuation factors include:

• existing equipment,
• business goodwill,
• intellectual property or know-how,
• geographic location,
• existing contracts, and more.

These elements directly influence whether heirs decide to accept the inheritance, particularly if the deceased’s business was in debt or mismanaged. Therefore, it is essential to prepare a formal inventory that reflects the economic and financial state of the business at the time of the succession, clearly outlining the net worth of the estate, including any business-related debts.

This inventory enables the heirs to assess the scope of their liability and determine whether to accept the estate with or without the benefit of inventory.

In the second case, where the deceased held shares in a corporation, liability is limited to the company’s capital. The deceased’s personal assets are not affected by the company’s debts, and only the shares themselves enter the estate.

In both cases, the goal is to protect the personal assets of the heirs, particularly when the business liabilities exceed its assets. For this reason, it is highly advisable to seek legal and notarial guidance, particularly when opting for the benefit of inventory (a form of limited liability acceptance).

Agenzia delle Successioni can serve as a key partner in such situations, providing guidance to avoid legal or financial mistakes. The initial consultation is free of charge, and can be requested by simply filling out a form in just three minutes.