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Net Worth

Definition - What does Net Worth mean?

Net worth is the value of a company or person once all assets are added up and all liabilities are deducted. An entity—whether it is a business or a person—is required for tax purposes to have a full legal accounting of the assets that they have and the liabilities that they owe. In determining what taxes are due and payable, the Internal Revenue Service will consider all entries that went into determining net worth and any legal requirement to pay tax will be based on the same.

Justipedia explains Net Worth

Net worth is considered when a lender determines whether or not to approve a loan to any entity, as they must ensure that there is enough income to pay the loan repayments. Legal requirements on lenders mean that an entity must have a set amount of net worth to access different amounts of loan funding and can also help to determine what interest rate is paid on the loan.

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