The time is ripe in the United States for transferring family business ownership to the next generation because of current low interest rates which allow for low transfer costs.
Whether gifting or selling the business to a child or other family member, the transfer can be made with relatively little expense. This however will not be the case for long, so owners looking to pass on the business should not delay.
Some family business owners choose to gift the business to a child or children upon retirement, while others opt to sell it to theirs. Is one way better than the other?
While there is no hard-and-fast answer to this, there are good reasons to argue for the latter, many believing that a business that is bought will be valued more. It also undercuts the silver spoon mentality as well as the silver spoon impression in the minds of others. You want your successor to have the respect of those within and outside of the business.
Advocates of the sale approach often like to refer to their children as successor owners rather than heirs. Semantics are important, and “successor owners” reinforces the idea in the minds of the parents, child and others as to the skill and worthiness of the succeeding owner.
At certain periods transfer taxes make selling the business to a child too burdensome, but at present the tax climate is conducive. Is it time to make the transition?