How to value shares issued in new limited company taking over sole trading business

Kiredoryor

We are converting a sole trading business of 10 years standing into a limited company. We shall issue shares to ourselves to the value of the sole trading company. Most items I am able to value using standard recognised procedures however I have trained up a number of freelance workers who are of considerable value to the business. I would be grateful if someone can suggest how I put a value on them.

J_B

I'm no expert at all, but wouldn't have thought there was any value to 'freelance workers' as they don't belong to the business.

Pennywise

What you are looking to value are the "intangibles", i.e. assets which don't have a physical presence.  Vehicles, equipment, etc is easy to value.  Intangibles is a lot harder.  It includes goodwill, intellectual property, trade names, copyright, customer lists, supplier lists, and yes, potentially a list of subcontractors.  The only feasible way to value is to value the business as a whole rather than the component parts, and that's usually a multiple of turnover, profit adjusted for owners' involvement, profit adjusted for depreciation, interest, etc - the multiples depend on your industry/profession.  EG it could be one times annual turnover, or 3 times adjusted profits - as pure examples.  You also have to consider how difficult it would be for someone else to start their own business, i.e. how easily they could find subcontractors - assuming you don't have any kind of exclusivity agreement with your subbies, presumably anyone else could easily find them by advertising, direct approach, etc so perhaps their value is very small.

Mistral001

Kiredoryor said:

We are converting a sole trading business of 10 years standing into a limited company. We shall issue shares to ourselves to the value of the sole trading company. Most items I am able to value using standard recognised procedures however I have trained up a number of freelance workers who are of considerable value to the business. I would be grateful if someone can suggest how I put a value on them.

They could also be of value to your competitors if they decide to do some work for other businesses, unless there is an agreement to work only for you as Pennywise has mentioned.  

Sandtree

Are you hoping to bring in additional shareholders? Just wondering why you want the matched value.

jonesMUFCforever

If it was me I would divide the balance of the capital account from the balance sheet divided by the number of shares issued.