Gifting Your Small Business to a Family Member: What to Do Next

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Small Business Attorney

A parent is no longer interested in operating her NJ business and wants to transfer it to her son. The business owns very few assets and has only $1600 in a business checking account. The business is registered in NJ not as an LLC or corporation but as a sole proprietorship filing a d/b/a trade name certificate, but uses Mom’s SSN as its tax ID number.

How best to re-register the business in the son’s name?

Depending on tax, legal liability, and good will considerations, the new business can be structured as a corporation, proprietorship/partnership or LLC. Each has advantages and disadvantages and the fact that there is an ongoing business has no major impact. Furthermore, the transfer can be by gift of the assets, a merger into an existing entity owned by son, or various other options.

While the business has very few assets, it’s probable those assets are “tangible assets” such as equipment, machinery, inventory, furniture, etc. But don’t forget about “intangible assets” that might belong to the business, such as goodwill, customer lists, etc. those intangible assets can be very, very valuable and have significant fair market value.

The business can be appraised by its CPA (if he/she is capable of doing so and has the requisite valuation experience for this type of business) or by a professional appraiser who has experience with this particular type of business.

My thought is generally to create a single member LLC, attach a trade name certificate and grow the business.

To discuss the sale of your NJ business, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.

Posted in Selling a Business.