Passing on your business: which solution to choose?

The october 06, 2020

Passing on a business, whether it be commercial, artisanal or agricultural, is a fundamental issue that is not always easy to anticipate.

Indeed, several mechanisms may be available to you, but everything will depend on your profile and your goals.

As part of a dismembered donation, you will be able to start transmitting while maintaining control of your business.

It will allow you to give bare ownership to your children and keep the usufruct. In this context, you will hold the usus and the fructus, that is to say, you will be able to participate in collective decisions, in decisions concerning the allocation of profits and also to continue to receive the income generated by the company.

This is a great way to anticipate your succession since the donation tax will be reduced. Indeed, the taxable value varies depending on the age of the usufructuary under article 669 of the General Tax Code. Therefore, it is wise to anticipate the transfer of your business as early as possible in order to reduce taxation and to support the buyer(s) so that the transition goes smoothly.

When you die, your children will regain full ownership of your business without having to pay new fees.

You can also use FBO, the Family Buy-out. This is particularly useful if you have several children, but only one of them is interested in taking over the management of your company.

It preserves the principle of equality between your heirs because it combines the donation by the entrepreneur of the securities of his company, and the creation of a holding company by the buyer. The holding company is a company which aims to hold the securities of another company.

The donation must take the form of a shared donation to ensure equity between the children: the transferee receives all the securities of the company with the charge for him to pay his brothers and sisters a balance, that is to say an amount of money equivalent to their rights.

It is possible that the amount of the balance is relatively high, so resorting to a holding company will increase its debt capacity in order to repay the balance due to the brothers and sisters.

This loan will be repaid thanks to the return of dividends from the activity of the operating company.

However, there are several possible configurations that should be chosen according to your goals and your family situation.

Regardless of the transmission strategy chosen, it is likely that you will be able to benefit from an optimization of donation rights thanks to the Pacte Dutreil.

In fact, it allows you, when donating the securities of a company, to obtain exemption from free transfer duties up to 75% of the value of the securities transferred. Therefore, you will be liable for taxation on the basis of 25% of the value of your business.

This device also applies in the event of the dismemberment of securities. Several conditions must be respected, in particular a commitment to retain shares.

These transmission operations may result in the taxation of a capital gain. There are several cases of exemption and optimization of this tax. It is for this reason that it is necessary to be accompanied by a professional so that the transfer of your business is carried out under the best conditions both in terms of business continuity and in terms of tax.

In order to benefit from the best solutions adapted to your objectives, contact our Wealth A7 advisers who will be able to support you.


Article by : Camille LESPRILLIER

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