What is the most important characteristic of the partnership that distinguishes it from direct ownership of the assets?
SE: Lack of free transferability. This also distinguishes a partnership interest from a stock interest. The essence of partnership law is that partners get to pick who their partners are. Both the articles of partnership and state partnership laws inhibit transferability. This means that discounts for lack of marketability are much greater than for direct fractional ownership of assets. SP: You compared the partnerships with “fractional ownership” of assets. Could you explain to our readers how the minority interest factor fits in? SE: My experience is that, if you start with net asset value, business valuers like yourself like to separate the discount into two stages: Discount for lack of marketability Discount for minority interest. These discounts are usually taken consecutively.
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