The day will come when you may have to walk away from your business and begin a new chapter of your life. Quite often, businesses are transferred from one family member to another – many times from parent to child. If you have reached that well-deserved retirement, here are factors to consider when transferring your business to a family member.
1. Gifting vs. Selling
Gifting a business, instead of selling it, can have major benefits. For one, it can reduce estate taxes, at least for now. Nobody can guarantee what the next administration will decide to do but for now, this is definitely a reason to gift instead of sell. Another benefit is having more control over the terms of the agreement.
2. Buy-Sell Agreement
The best advice we can give is to not forego a contract. This may be tempting since you are dealing with a family member but this should be treated like any business sale. This buy-sell agreement can include relevant details that will be important once there is a transfer of ownership.
3. The Transfer
When selling your business to a family member, the IRS is going to get involved. In order to ensure the transaction is legal and ethical, they will ask the necessary questions. Of course, by working with a business broker, you will have fewer concerns about every step taken being the correct and legal one.
You can be one step closer to retirement by setting your business up for success even after you are gone. And what a wonderful gift to leave your family – an established business they can continue to grow and develop for future generations.
Contact your local Transworld Business Advisors today! Our experienced advisors are well-versed in these types of transactions and are available to answer questions and share their experiences with you to ensure a smooth transition.