--- title: Discounts for Closely Held Businesses description: There are unique advantages for an owner, or owners of closely held businesses. One of those advantages is to be able to transfer the interest in the business at a rate that is less than what most people would think of as the value of that interest. --- [![Goosman Lawfirm](https://blog.goosmannlaw.com/hs-fs/hubfs/Goosmannlaw%20October2017/images/Goosmann_Law_Firm_logo_4C-white.png?width=1250&name=Goosmann_Law_Firm_logo_4C-white.png "Goosman Lawfirm")](http://goosmannlaw.com/) - [COVID-19 Toolbox](https://goosmannlaw.com/covid-19-resource-toolbox/) - Our Team - [Attorneys](https://goosmannlaw.com/attorneys/) - [Non-Attorney Staff](https://http://goosmannlaw.com/non-attorney-staff/) - Practices & Industries - [Practices](https://goosmannlaw.com/practices/) - [Banking & Finance](https://goosmannlaw.com/banking-finance/) - [Bankruptcy, Restructuring & Workouts](https://goosmannlaw.com/bankruptcy-restructuring-workouts/) - [Business](https://goosmannlaw.com/business/) - [Divorce & Family Law](https://goosmannlaw.com/divorce-family-law/) - [Employment](https://goosmannlaw.com/employment-law/) - 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There are unique advantages to being the owner, or one of the owners, of a closely held business. One of those advantages is to be able to transfer the interest in the business at a rate that is less than what most people would think of as the value of that interest. A closely held business can be thought of as a business with a small number of owners that usually have direct involvement in running the business from day to day. The limited number of owners and often local nature of the businesses means there is not a ready and ascertainable market in which to put the business up for sale. As a result, it can be very difficult to value the business and the owner’s interest therein. To account for this, the fair market price of the business and the transfer laws allows for a discount to be taken against the value of the business. This discount decreases by some percentage value of the business and has the practical effect of allowing a person to transfer a greater amount of property than the tax liability incurred by the transfer would otherwise allow. Reduce the value of property moving from one generation to the next, and we reduce the taxes levied. In order to claim such a discount on a transfer, it must be noted on a Form 706 and the discount supported and justified by documentation. What that means is that the discount taken must be the product of reliable methods reliably applied, and done so by a qualified appraiser. If the discount is not properly taken and supported, this opens the discount up to attack by the IRS, which could mean additional taxes later and even, in rare instances, a substantial penalty. 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