3

A P R O F E S S I O N A L D E V E L O P M E N T J O U R N A L f o r t h e C O N S U L T I N G D I S C I P L I N E S

the value examiner July/August 2015

JULY/AUGUST 2015

Equity Crowdfunding

ValEx J-A 2015b.indd 1 8/4/15 9:16 AM

On The Cover In This Issue…

6

THE S VALUE PREMIUM—BENEFIT OR BOONDOGGLE?By Sarah von Helfenstein, MBA, CVAAs a profession, business appraisers continue to chew on the issues surrounding the value advantages or potential impact derived from the tax attributes of pass-through entities (PTEs—in particular, S corporations) v. those of C corporations. After some years of trying different paths through the thicket, this author has identified a number of anomalies in current practice that make the resulting PTE premium questionable.

WHAT THE DAUBERT TEST MEANS TO A FINANCIAL EXPERTPART TWO: DAUBERT’S EFFECT ON THE FEDERAL COURTSBy Joryn Jenkins, Esq., and Michael J. Mard, CPA/ABV © Copyright 2015 by authors. Used with permission by The Value Examiner In Part One of this series, we discussed how Daubert has increasingly replaced Frye as the standard for admitting expert scientific testimony in trials and highlighted some significant cases in the most recent state to adopt Daubert—Florida—as its standard. In Part Two, we discuss how, once a financial expert develops his/her hypothesis and assertion, that opinion is empirically tested. The guidance is provided by the federal courts, in which the Daubert test originated and has been the standard for more than twenty years.

12

18

The Growth of Equity Crowdfunding: Crowdfinance

Options For Private Companies—and Secondary Markets For Investors—Will

Keep Expanding

By David M. Freedman, Editorial Adviser, The Value Examiner and

Matthew R. Nutting, Esq

Most Americans either don’t know what crowdfunding is or still think crowdfunding is narrowly confined to Kickstarter and other rewards-based fund-raising websites. In polite company, the terms "securities crowdfunding" or "equity crowdfunding" typically evoke bewilderment, derision, or fear of fraud. Meanwhile, start-ups and growing companies have raised tens of billions of dollars through Internet-based equity crowdfunding platforms. In this article, Dave Freedman, former editor of The Value Examiner and Matthew R. Nutting, Esq, coauthors of Equity Crowdfunding for Investors (John Wiley & Sons, Inc.; Hoboken, New Jersey, 2015), gives an overview of how equity crowdfunding could change the investment world.

4

A P R O F E S S I O N A L D E V E L O P M E N T J O U R N A L f o r t h e C O N S U L T I N G D I S C I P L I N E S

the value examinerJuly/August 2015

E D I T O R I A L S T A F FCEO & Publisher: Parnell Black

Senior Editor: Nancy J. McCarthyEditorial Adviser: David M. Freedman

Copyeditors: Molly Klinefelter and David Samuel Levinson

E D I T O R I A L B O A R DChairman:

Lari B. Masten, MSA, CPA, ABV, CFF, CVA, ABAR, MAFF

Past Chairman: Michael Goldman, MBA, CPA, CVA, CFE, CFF

Ashok Abbott, PhDEric J. Barr, CPA/ABV/CFF, CVA, CFE

John E. Barrett Jr., MBA, CPA/ABV, CVA, CBA Neil J. Beaton, CPA/ABV/CFF, CFA, ASA

Rod P. Burkert, CPA/ABV, CVA, MBAWolfgang Essler, CVA (Germany)

Andrew M. Malec, PhDKevin Papa, CPA, CVA, ABV

Donald Price, CVAKeith Sellers, CPA/ABV

Sarah von Helfenstein, MBA, CVAThe Value Examiner® is a publication of:

National Association of CertifiedValuators and Analysts (NACVA)

5217 South State Street, Suite 400Salt Lake City, UT 84107

Tel: (801) 486-0600, Fax: (801) 486-7500E-mail: NACVA1@NACVA.com

A N N U A L S U B S C R I P T I O NUnited States—$215

International—$255 U.S. FundsFree to accredited university libraries

S U B M I S S I O N D A T E SIssue Submission Dates Publish DatesSept./Oct. 2015 Aug. 15 Sept. 1, 2015Nov./Dec. 2015 Sept. 15 Nov. 1, 2015

A L L S U B M I S S I O N SThe Value Examiner is devoted to current, articulate, concise, and practical articles in business valuation, litigation consulting, fraud deterrence, matrimonial litigation support, mergers and acquisitions, exit planning, and building enterprise value. Articles submitted for publication should range from 500 to 3,000 words. Case studies and best practices are always welcome.S U B M I S S I O N S T A N D A R D SAll articles should be thoroughly edited and proofread. Submit manuscript by e-mail (in standard word processing format) to Nancy McCarthy: NancyM1@NACVA.com. Include a brief biography to place at the end of the article and a color photo of the author. See authors’ guidelines and benefits at www.nacva.com/examiner/Publishing_Articles.pdf. The Value Examiner accepts some reprinted articles, if accompanied by appropriate reprint permission.R E P R I N T SMaterial in The Value Examiner may not be repro-duced without express written permission. Article reprints are available; call NACVA at (800) 677-2009 and/or visit the website: www.NACVA.com.

Departments

• Editorial . . . . . . . . . . . . . . . . . . . . . . . . Gray

• Valuation . . . . . . . . . . . . . . . . . . . . . . . .Blue

• Forensic Accounting . . . . . . . . . . . . Green

• Litigation Consulting . . . . . . . . . . Orange

• Practice Management . . . . . . . . . . . . . Red

• Education Review . . . . . . . . . . . . . . Purple

Production: Mills Publishing, Inc.; President: Dan Miller; Art Director/Production Manager: Jackie Medina; Magazine Designer: Jackie Medina; Graphic Designers: Leslie Hanna, Ken Magleby, Patrick Witmer; Advertising Representatives: Paula Bell, Karen Malan, Dan Miller, Paul Nicholas.

Mills Publishing, Inc., 772 East 3300 South, Suite 200, Salt Lake City, Utah 84106, 801-467-9419. Inquiries concerning advertising should be directed to Mills Publishing, Inc. Copyright 2015. For more information please visit millspub.com.

Articles are color-coded by topic for easy identification.

P R A C T I C E M A N A G E M E N T

TIPS FOR PRACTITIONERSEffective CommunicationBy Michael Gregory, CVA, ASA, Qualified Mediator

The Value Examiner is pleased to introduce a new column. Over the next several issues, the author will provide practitioners with tips, ideas, and points to ponder in developing new business.

L I T I G A T I O N C O N S U L T I N G

COURT CORNERBy Peter Agrapides, MBA, CVA

Summaries and analysis of the most important cases that involve valuation and expert testimony issues, in both federal and state courts.

P R A C T I C E M A N A G E M E N T

PRACTICING SOLOBy Rod P. Burkert, CPA/ABV, CVA

The author interviews sole practitioner Chris Mutchler, CPA, CVA, CFE, from Bramerton, Washington.

32

35

30

E D U C A T I O N R E V I E W

BACK TO BASICSFORENSIC COMPARISON OF VARIOUS FORMS OF OWNERSHIPBy John T. Alfonsi, CPA/ABV, CFF, CFE, CVA, MST, and Walter M. McGrail, JD, CPAThis column serves as a refresher on some of the basics of valuation. It features information from practitioners, lecturers, and educators from within the NACVA community.

24