Discount for lack of control (DLOC) is a valuation adjustment applied to minority ownership interests in closely held businesses to reflect the reduced value of shares that do not carry controlling rights over management, dividends, or liquidity events. Minority owners typically cannot force a sale, change management, or set compensation policy, making their interests less valuable per share than a controlling block. DLOC is an important factor in estate, gift, and buy-sell valuations, where supportable discounts can reduce reported transfer values and potential taxes.

Advisors encounter discounts for lack of control when coordinating business valuations for buy-sell agreements, estate-planning transfers, or charitable gifts of minority interests. Professional appraisers document DLOC assumptions using empirical studies and company-specific factors. Estate and gift tax returns rely on these valuations to report interests transferred to heirs or trusts. Understanding discount for lack of control helps advisors explain why minority stakes are not valued at simple pro-rata percentages and how defensible discounts can support tax-efficient succession strategies.