Valuation Engagement Letter Template for the United States

A Valuation Engagement Letter is a formal contract that establishes the terms and conditions for professional business valuation services. This document serves as the foundation for your valuation engagement, clearly defining the scope of work, professional responsibilities, and deliverables while ensuring compliance with United States professional standards and regulations.

When do you need this document?

You need a Valuation Engagement Letter whenever you're engaging a professional appraiser or valuation expert for business-related services. This includes situations such as mergers and acquisitions, estate and gift tax planning, financial reporting requirements, litigation support, buy-sell agreement triggers, divorce proceedings, or employee stock ownership plan (ESOP) transactions. The letter is also essential for compliance with professional standards when conducting valuations for tax purposes, regulatory filings, or court proceedings. Without this formal engagement letter, both you and the valuation professional face increased liability and potential disputes over scope and deliverables.

Key legal considerations

Your Valuation Engagement Letter must clearly specify the valuation's intended purpose and users, as this directly impacts the scope and methodology required. The document should outline which professional standards will be followed, typically including USPAP (Uniform Standards of Professional Appraisal Practice) for certified appraisers and AICPA SSVS for CPAs. You'll need to address liability limitations, indemnification clauses, and fee structures to protect all parties involved. The letter should specify the standard of value (fair market value, fair value, investment value), premise of value (going concern vs. liquidation), and any special assumptions or limiting conditions. Additionally, ensure the document addresses confidentiality requirements, document retention policies, and the professional's independence requirements under applicable regulations.

Legal requirements in United States

Under United States law, valuation professionals must comply with specific professional standards depending on their credentials and the engagement type. USPAP compliance is mandatory for certified and licensed appraisers, requiring adherence to ethics, competency, scope of work, and reporting standards. For tax-related valuations, the Internal Revenue Code imposes additional requirements, including specific documentation standards for gift and estate tax purposes. If the valuation involves public companies or securities, SEC regulations may apply, requiring compliance with additional disclosure and independence requirements. Professional liability insurance requirements vary by state and professional organization membership. The engagement letter must also comply with state contract law, ensuring proper formation, consideration, and enforceability while addressing any state-specific professional licensing requirements for valuation services.