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Can you give your company to someone, or do you have to sell it?

On Behalf of | Mar 18, 2021 | Business Law |

Generally, when someone wants to transfer ownership of their company, they sell it. Maybe you started the company from nothing and ran it for the last 20 years. Now you want to retire, and selling it gives you a nice influx of cash with which to do so.

But what if you’re not planning to sell, but would rather give it as a gift? Perhaps you’d like to transfer ownership of the company to one of your adult children, but you’re not going to make them pay you for the company. Can you do so?

Two primary ways to transfer your company

You certainly can give your company away, and there are two main ways to do it. First, you can give it to your child as a gift. They may have to pay some taxes, however. Therefore, it may be wise to transfer ownership slowly, piece by piece. Every year, you can give away $15,000 worth of assets without any gift taxes. Some company owners spend years slowly transferring ownership. It doesn’t change the day-to-day operations and they can avoid taxes.

The second method is to leave your company to your child as part of your estate plan. This is fine, but it only transfers ownership on your death. If you simply want to retire, this may not be ideal for you. One potential tactic would be to put the company in to the estate plan, hire your own child to run the business (even though you still own it) and take a step back in your own involvement.

Transferring wealth can be complicated. You need to know all of the options you have to avoid taxes and make the transfer go smoothly. An experienced attorney can help.