Family Business Succession Planning: Selling or Gifting?

Many family business owners have a vested stake in passing on their company to the next generation within their family. This can be accomplished in two different ways: selling ownership or gifting ownership.

A family transition gives the seller of the business liquidity but also can create a taxable event. Gifting the family business, however, provides no liquidity but in certain cases can be tax free for both the donor and the done. A taxable estate may still exist for family business operators with large estates.

If you pass an estate above $24.12 million for a married couple and $12.06 million as a single individual, access values beyond that will be subject to 40% federal estate taxes. You might wish to instead gift those assets into a trust to pass them on to the next generation tax free, leveraging your lifetime gifting exemptions.

As a part of a family business succession planning transfer, estate and gift tax planning well in advance is extremely important.

Most people who want to pass their business on to family members are doing so partly for continuity but also for some of the financial benefits associated. You also don’t have to go through the process of formally listing your company for sale and trying to find the perfect buyer. But no matter who is taking over your company, you must think through some of the important details associated with tax consequences of a gift or sale of your family business. Every stakeholder should be on the same page about the intention behind the transfer and the financial reasons supporting it.

Talk to a Pasadena business planning lawyer today to learn more about how this might fit into your estate plan, too.

You should always work directly with professional attorneys who understand how to guide you through this process and who can answer your questions as they arise throughout all stages.






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