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Buying a family business in ohio

Buying a family business in ohio
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3/21/2018
P. Simmons
P. Simmons, Attorney
Category: Legal
Satisfied Customers: 36,624
Experience: 16 yrs. of trial experience
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Hi, My name is***** am an attorney with over 16 years experience. Hopefully I can help you with your legal question.

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I am sorry for this dilemma. But not sure I understand your specific question. Do you have a question regarding this?

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Customer reply replied 1 month ago
Looking for advice or more like options on the best way to gain ownership of a family business. It is an S Corp machine shop where I currently own 10% and my mother and father each own 45% each. They purchased from my grandparents under a note which is paid. They both are basically retired.

Ok...are mom and dad willing to convey their ownership interests to you?

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Customer reply replied 1 month ago
I have ran the business for many years. My dad who just returned from Florida just asked me finally. I have used the site b4 and wanted to hear other opinions. It is a completey mutual agreement.

Thanks

Then this is easy. You will want to have our parents convey to you the shares required to get you to 50%+ ownership.

There are, essentially, 2 ways to do this.

1. Sale: you calculate the value of the business and then you pay the value of the shares.

2. Gift: they can give you interest. HOWEVER, be advised that there may be a tax associated with the gift. The current federal gift tax exemption is $15K/year. SO if they give a gift greater than this amount, they (as the donor) will owe a tax on that amount.

Please let me know if you have more questions. I am happy to help if I can. Otherwise, please rate the answer so I may get credit for my work.

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Customer reply replied 1 month ago
Ok. This is a bit more complex from my stance. 1. The value may be approx. 1.5 to 2 million thanks to me but this hasn't been discussed yet. I have norhing near that, so not simple. They also want to give me 100% ownership. (Is this the best option)

That is complex. There will be a significant tax to them if they transfer to you outright.

I would consult with a local estate planning attorney...they can create a trust, and make you the beneficiary...that is one way to get around the gift tax. But you need to have the trust created by a local attorney before this can happen.

Please let me know if you have more questions. I am happy to help if I can. Otherwise, please rate the answer so I may get credit for my work.

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Customer reply replied 1 month ago
Of course they do not want just transfer at no cost. They asked to me to buy them out. Either by a loan or note where they get x amount monthly
Just looking for opinions

Ah...well, certainly they can "loan" you the money. And you pay back over time with the profits generated by the business. Just like any business loan, though if you can negotiate with them directly I suspect the terms of the loan would be more favorable than for a commercial loan.

At the end of the day, to get ownership they need to transfer shares to you. Whether it is via gift or purchase.
If you are purchasing, then you need to figure out the financing (if you can not pay outright)

From a legal standpoint, there is no significant difference to you between owning 51% and 100%...either way you control the business decisions of the company. But if you own less than 100%, you would owe a fiduciary duty to the remaining shareholders...so from your perspective, if you can swing 100% ownership, that makes it easier (for you)

Please let me know if you have more questions. I am happy to help if I can. Otherwise, please rate the answer so I may get credit for my work.

P. Simmons
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