What is the best way to leave a business to a family member without having to pay a lot of taxes and making it as easy as possible?

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What is the best way to leave a business to a family member without having to pay a lot of taxes and making it as easy as possible?

My aunt wants to leave her business to members of her family but she doesn’t want to sell it to them but more or less just give it to them. The business is right now a sole proprietorship and we are thinking about transferring it into an LLC. Want to know if that would be a good idea and should it be done before the business is transferred to a new owner or after? We were thinking about putting it into a trust but wanted to know if there was a better way to change ownership without a lot of cost involved.

Asked on July 27, 2011 Iowa

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

This question is really best asked to an attorney and an accountant in your area.  you have touched on a lot of good ideas here with the trust and LLC but it may not give you the end result that you wish. There are other options as well such as forming a partnership with a partnership agreement in place.  But the type of business that it is may give rise to a different type of agreement that would suit you all best.  The tax structuring of the business is important as well but really you have to understand that you can not avoid tax liability totally on both ends - hers and yours - at some point in tie.  Only reduce it.  Good luck.


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