Interests in real property are often held directly by multiple owners.  The market values of these fractional interests are generally discounted from their pro rata share of the whole, due to their reduced control over the property, and their impaired liquidity.    Structured entities have rights and obligations specified by agreement and statute.  They can be taxable , or pass tax liability through to the partners.  The most important, for valuation purposes, are established voting rights, formulas for distributing cash flow and proceeds of asset sales, and limitations on liability and transferability of interests. 

Control

The percentage owned of a business has a large impact on the value.  A non-controlling interest is typically worth a lot less than a control interest.  A minority interest does not have the ability to sell underlying business assets, nor the ability to force the sale of the firm to achieve liquidity.  Minority interests neither have the ability to change dividends or other compensation.  They typically have no cash flow from their investments.  The control owners are able to divert corporate funds to themselves in the form of high salaries, perks, etc.  The business appraiser must determine if a discount for lack of control is applicable, and if so, the magnitude of the discount.

Marketability

Ownership interests are considered liquid, or marketable if the investors can convert their investment to cash in three days.  For instance, interests in the stock market, i.e., interests in publicly-held firms, are marketable.

On the other hand, ownership interests in privately-held companies are considered non-marketable.  As part of the appraisal process, the appraiser must determine the appropriate discount for lack of marketability that should be applied to a specific business ownership interest.  The level of control impacts the magnitude of the discount for lack of marketability.  A minority interest is less marketable than a control interest.  Hence, the marketability discount should be higher for a minority interest.

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