This is like your neighbor gifting you their child's drawing and saying it's worth $100.
Without somebody actually buying at that price, it's just a made up number.
There are methodical ways of valuating a private (and public) company. Some are pessimistic and some are wildly optimistic. Your can legally use whichever one you want, only you must only use that valuation method for everything. It's illegal to value the company low for taxes and high for loan collateral. And if you sell it, you can owe back taxes if your valuation was off (sale price is the new valuation).
This is overly-simplified US accounting rules (from finance class 10 years ago)
Higher than I expected.
This is like your neighbor gifting you their child's drawing and saying it's worth $100.
Without somebody actually buying at that price, it's just a made up number.
There are methodical ways of valuating a private (and public) company. Some are pessimistic and some are wildly optimistic. Your can legally use whichever one you want, only you must only use that valuation method for everything. It's illegal to value the company low for taxes and high for loan collateral. And if you sell it, you can owe back taxes if your valuation was off (sale price is the new valuation).
This is overly-simplified US accounting rules (from finance class 10 years ago)