Transferring the Business to the Next Generation, While the Owner Is Still Alive

Tamara Lund Hansen

Student thesis: Master thesis

Abstract

The objective of this task is Danish legislation concerning change of the ownership of a company from one generation to the next generation with regard to regulations concerning company transformation and restructuring. The company transformation and restructuring can be performed in a taxable mode, where the tax is going to be paid immediately, or it can be made tax-free, in the case when the tax is postponed.
The transformation and the restructuring of the company can have economic consequences if it is made taxable. Therefore, the owner’s finances and preferences is a significant factor for the desired taxable or tax-free business transformation and restructuring.
About transferring the business from one generation to the next, the trade value (price) of the business is essential. The new owner should be able and motivated to buy the business and after takeover still be able to pay all liabilities. In that matter it can be done cheaper if the business is a Danish ApS or A/S because there is more possibilities, when the new owner have to finance purchase of the business. It is also possible for the owner to give the new owner the company as a gift, where the gift tax is lower then the company tax. The new owner (family def. KSL § 33 C /ABL § 34) can also step into the old owners tax position, and the tax then just have to be paid then the company would be sold afterwards.
There are many factors affecting, which business transformation and restructuring is the most appropriate for the individual company and it’s owner. Thus, it is very difficult to recommend an unambiguous and economically most beneficial solution, as the result depends on the complexity of different factors each company and it’s previous and the new owner consists of.
It is important to make sure that all demands is fulfilled when you want a tax-free business transformation and restructuring since lack of demands will means that the business transformation or restructuring will be fully taxable.
When the ownership of a company is going from one generation to the next generation, there are also many soft values to consider. It is wherefore important also to have them in mind, while planning and implementing the change of the company ownership from one generation to the next.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages83