This valuation is for a veterinary clinic which is structured as a partnership. We wanted to make sure we were accurate when calculating ‘Officer Compensation’ in the 7 step process. Where would I find payroll information on the 1065 tax document? Is it there or would I need to ask the partners for a breakdown of the payroll?

Partners are often paid "guaranteed payments" as salary, but my best advice is to ask every business owner the following questions:

1) For the past two years (the two most current years entered into the Bizequity system), what was the actual total compensation for each owner and each family member working at the business and were they f-t or p-t? Include salary, deductible bonus payments, payroll tax burden and any perks/benefits for each owner and family member.

2) Were there any one-time, unusual, non-recurring or non-operating expenses or revenues or gains or losses during the past two fiscal years (the two most current years entered into the system).

It is essential to get the owner comp figure correct. If more than one owner and/or family members work, you must compare the ACTUAL total compensation to each of these individuals with their probable replacement cost at market level and then add or subtract any differential (add if the ACTUAL is greater than the REPLACEMENT cost and vice-versa).