A minority discount is the reduction applied to the valuation of a minority equity position in a company due to the absence of control and power by that minority shareholder (corporation) or interest holder (LLC). Minority equity holders usually have the inability to dictate the future strategic direction of the company, the election of directors (corporation) or managers (LLC), the nature and timing of the return on investment, or even the sale of their own equity positions in the company. This absence of control reduces the value of the minority equity position against the total value of the company. An outsider would be less inclined to purchase or acquire that minority equity position than to purchase or acquire a majority equity position in the company. With majority ownership comes power and control, and risk is minimized. The opposite is true of a minority equity position. As an example, assume there are 2 shareholders in a corporation with 1000 shares, and the majority shareholder owns 600 of the 1000 shares, giving that person a 60% vote on all matters in the company. Any matters requiring a majority vote would be completely subject to that person’s power and control. Any reasonable person looking to acquire an interest in that company wouldn’t value every share in the company equally. Rather, the shares held by the holder of the 60% position would each be worth more than the shares held by the holder of the minority 40% position.