The Myth:
Pass-through entities like S-corporations are automatically worth more because they avoid double taxation.

The Reality:
While S-corps avoid corporate-level taxes, owners still pay taxes personally. The real drivers of value are cash flow, growth, and risk — not tax structure. Electing S-status doesn’t magically create more profits, lower costs, or reduce risk. A business is worth what its sustainable, transferable cash flow supports, regardless of tax election.

Why It Matters:
Valuing a business based solely on its S-corp status can lead to overpaying — or approving a loan that isn’t properly secured by real value. For SBA lenders especially, focusing on economic benefit, not tax labels, protects against inflated valuations.

Practical Tip:
Always base your valuation on normalized after-tax cash flow, and adjust for tax status separately — but cautiously.