Many business owners in Texas dream of their children taking over their companies or their portions of their companies when they are ready to retire. It seems like a simple enough transaction, but it may be more involved than expected. The good news is, if transferring business ownership to one’s offspring is what is wanted, one can seek help making sure it is done right.
Different ways to go about the transfer
There are a couple of different ways to go about transferring business ownership to a child. One can start giving it away in small installments years before the planned retirement. Doing it this way can help save on taxes. One could also sell the company outright or by offering owner-financing or a lease-purchase agreement. No matter which way one goes about it, legal paperwork will need to be filed, and taxes will need to be paid — among other things.
Business structure matters
How a business is structured can affect how a transfer of ownership can occur. If dealing with a sole proprietorship, it is the assets that are sold/transferred to a new owner, not necessarily the business. With a Limited Liability Company, as with partnerships, only the owner’s shares can be sold or transferred according to the terms laid out in the operating agreement. Finally, S and C Corporations have rules regarding how shares can be transferred to a new owner, which should be laid out in the corporation’s bylaws.
Do not go it alone
When wanting to transfer business ownership to one’s child, there is a lot involved, much to consider and certain rules to follow. Do not go it alone. With the right help, business owners in Texas can make sure they take the appropriate steps to transfer their companies so when everything is said and done, one can walk away knowing everything was done right.