Transferring ownership of a business to children who are involved in the business is often the succession plan of choice. If the business has significant value, however, estate and gift tax issues can make moving ownership from one generation to the next problematic.
One transfer technique for businesses that are not capital intensive is to have members of the next generation form a new company and direct business of the old company to the new one.
Over time, as more and more business is run through the new company, the old company becomes less valuable and the new company becomes more valuable.
An issue with this technique is that it may involve a transfer of goodwill of the old business to the new business.
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