Bumps with handing over your Partnership
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When you have a business that is a going concern, you’re naturally worried about how it’s going to be after yo move into retirement. The first thought that will probably occur to you, is to hand it over to your children to manage.
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However, doing this in a simple way is not easy. You want to legally hand over your business in such a way that it’s not considered a liquidation, and also not a gift. Both of these, will attract a tax that you may not have forseen.
Your business is going to be valued according to what the Market deems is ‘Fair Value’. Grafton ‘Cap’ Willey of accounting and consulting firm Tofias PC, says that a transfer of over $12,000 will attract gift tax. In addition, if it’s a partnership, say between yourself and your wife, it is considered liquidated if more than half of the holdings change. In this case, it’s very important as to how the business is transferred.
A tax professional is a must here to examine all the ramifications of such a move. You need to be aware of these issues before you rush into anything.
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