Part of business planning involves deciding what one will do with the company when he or she is ready to retire or what will be done with the company upon his or her death. Many family business owners in Michigan are likely to choose keeping their companies within the family, which is understandable. The real question then is should the transfer to relatives come through a sale of business or by giving the business as a gift?
There may be advantages to both, but, currently, there are some who are saying that selling is the best option. Why sell a company when one can just give it away? One of the biggest issues here is the taxes involved. Relatives may end up paying a hefty sum to the government for receiving a business as a gift.
Why sell to loved ones? When interest rates are good, there are tax advantages instead of burdens. There is also a pride of ownership that can help keep a new owner's interest in the company up, helping with future success.
Business owners in Michigan who choose to keep their companies within their families certainly have a lot to consider. Help is available to review all of the advantages and disadvantages that accompany a sale of business to relatives versus giving a company as a gift. Seeking legal guidance will not only ensure the best decision for one's company and family is made, but it will also help ensure that the company will be able to survive and thrive during a transfer of ownership.
Source: Forbes, "Why Now Is The Time To Transfer Your Family Business To The Next Generation", Steve Parrish, July 13, 2015