Generally there are two discounts considered in the valuation of a closely held business:
- Marketability
- Minority Interest
The marketability discount will apply in many valuation situations, whereas the minority discount will only apply when the interest being valued is a minority interest. The market discount is generally applied before the minority interest discount, because the marketability discount will apply whether or not the interest is a control or noncontrol value. The valuation conclusion is made only after the marketability discount. However, the two discounts are not unrelated. In fact, a marketability discount might be higher because the valued interest is a minority interest. While the two discounts should be applied separately, they should be considered together.
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