Individual business Transfer of the child to a family member
Verified 03 October 2024 - Directorate for Legal and Administrative Information (Prime Minister)
The company may be transferred in its entirety to a family member. The assignment is subject to the completion of several formalities in order to ensure the protection of the transferor, the purchaser and creditors company.
Step-by-step approach
The complete transfer of the company implies a Universal Transmission of Professional Heritage (UPOH), i.e. the transfer of all the goods, rights, obligations and securities necessary for the business.
In other words, the Head of company (the transferor) cedes theactive of the company (in particular, components of the goodwill) and its indebted (debts, collateral).
Specifically, the transferor transmits the goodwill, which includes the following elements:
- Clientele
- Sign and trade name
- Right to lease : right to take over from the holder of a commercial lease, occupy the premises and enjoy a right to renewal of the lease
- Furniture, material and tooling : vehicles, machinery, computers, offices
- Inventory and goods
- Intellectual property rights : patents, software, trademarks, domain name
- Money : cash fund means any cash held at the place of pursuit of the professional activity and the sums entered in the bank accounts dedicated to that activity
- Employment and insurance contracts
In addition, a universal transfer of professional assets implies the transfer of these other elements:
- Immovable property used for the activity (if owned): including that part of the principal residence used for business purposes
- Receivables : amounts owed by customers but not yet paid
- Collateral : pledge of the goodwill, for example, a pledge on inventory.
- Debts : repayment of bank loans and operating debts (e.g. to a supplier). The assignment of a debt requires the written agreement of the creditor. However, contributions and social contributions debts are not included in the transfer.
Please note
Universal transfer of professional assets (UWTP) is the default regime. Instead, the head of company can carry out a non-integral transfer and give away items in isolation. For example, an assignment of the sole goodwill without the real property and debts of the company.
The drawing up of an act of assignment shall be obligatory. It shall include the following:
- Divested intangible and tangible assets : customer, brand, trade name, right to lease, patent, equipment, tools, stock, etc.
- Identity of the parties : full name, date and place of birth, address of domicile
- Date and nature of the act : authentic instrument or private act
- Sale price and payment terms
- Origin of the transferred goodwill : identity of the predecessor, date on which the transferor acquired the company himself and at what price to establish any capital gain
- Turnover and operating income : over the last 3 financial years prior to the transfer
- Statement of pledges encumbered on the fund : these are pledges which have been granted to creditors of the company in the 10 years preceding the date of the sale. If the company is not pledged, the instrument must also state that fact.
- Commercial lease terms : date and duration of the lease, amount of rent, conditions for renewal, identity and address of the lessor
- Agreement of the spouse : if the transferor is married under the community system
Since 21 July 2019, the disclosure of information on the origin of the company, the statement of collateral and the results of the last 3 financial years no longer required. Nevertheless, the disclosure of all this information allows the assignment to be concluded in full transparency between the parties.
Registration procedures
The deed of assignment must be filed with the tax office of the registration without waiting if it is a privately signed document or, in a 1-month period after the sale is signed, if the authentic instrument.
The transferor must file with the registration department, on site or by mail, the following:
- Assignment of company in 2 copies
- Trade Transfer Declaration Form in 3 copies
- Form for declaring the condition of equipment and goods transferred in 3 copies
- Payment of the registration fee (in cash up to €300, by check or by transfer)
Declaration of transfer of goodwill or goodwill
Declaration of transfer of goodwill or goodwill: condition of equipment and new goods transferred
Who shall I contact
Warning
Universal transfer of professional assets is not valid if either of the parties has been the subject of an personal bankruptcy. Such bankruptcy shall entail the prohibition of managing, directing, administering or controlling, directly or indirectly, any company or business.
Payment of the registration fee
The transmission of the company shall give rise to payment of a registration fee to the tax administration. This right is calculated on the sale price as follows:
- 0% up to €23,000
- 3% between €23,001 to €200,000
- And 5% beyond €200,000
The registration fee may not be lower €25. If the sale transaction includes sales of new goods, they shall be exempt from the registration fee.
The cost of registration is in principle at the expense of the purchaser. However, the deed of assignment may provide that the payment of the fee is to be borne by the transferor or shared between the two parties.
Please note
Individual business When the treated as an EURL (option for business tax), its transfer is treated as a transfer of shares. In this case, a rate of 3% is applied to the sale price (or 5% for businesses with a preponderance of real estate).
In addition, where the assignment is granted to a family member, a abatement of €500,000 may be applied to the value of the fund before the registration fee is calculated.
This arrangement shall apply if following conditions the following shall be combined:
- The company carries out a commercial, craft, industrial, agricultural or liberal activity (except for the management of its own movable or immovable property).
- The assignment is granted to the spouse of the assignor, to his partner bound by a civil solidarity pact, to his ascendants or descendants in a direct line or to siblings.
- The transferor must have held the transferred fund for more than 2 years.
- The purchaser undertakes to pursue the professional activity and to ensure the effective direction of the company for at least 5 years from the takeover.
When transferring his company, the transferor must comply with advertising formalities obligatory. These make it possible to return the assignment enforceable against third parties.
Publication in the Bodacc or in a legal advertising medium
The transferor has the choice between 2 means of publication :
- Either publication in the Bodac
- Either publishing legal announcements in a medium
Publication in Bodac
The transferor shall have a period of1 month from the transfer of its company to publish a notice to the Official Bulletin of Civil and Commercial Advertisements (Bodac).
To publish its opinion, it must contact (on the spot or by post) the commercial court registry on which the seat of his company depends. The Registry will send the notice directly to the dedicated website for publication bodacc.
The notice must include following mentions :
- Birth name, surname, forenames and, where applicable, commercial name of the transferor and the transferee (the acquirer)
- Professional activity and EPA code
- Address of the principal establishment or, in the absence of an establishment, the address of the dwelling-place where the transferred company is fixed
- Siren Number
In addition, the notice must be accompanied by a descriptive statement of the transferred professional assets, i.e.:
- Overall value of theactive
- List of collateral from which the company benefits and the amounts of the claims secured by those securities
- Aggregate value of liabilities
- List of the professional assets subject to a security right and, for each of the assets concerned, the nature of the security right and the amount of the secured claim.
The descriptive state shall be established taking into account the last closed accounting year updated on the date of the transfer, or, for individual contractors not subject to accounting obligations, on the date resulting from the agreement of the parties.
Publish Legal Ads in Media
The transferor shall have a period of1 month from the transfer of the company to publish an opinion in a legal listing support authorized in the department in which the professional activity is carried out.
Once published, a certificate of publication the notice of amendment is issued.
Opposition by creditors
The creditors of the company shall have a1 month as of the advertisement for oppose the transfer professional heritage.
Creditors shall indicate, by registered letter with acknowledgement of receipt or by extrajudicial act transmitted to the purchaser's domicile, the amount and causes of the claim.
The judge shall examine the merits of the application and, where appropriate, order repayment of the debt. In this case, the transferor is committed to all its movable and immovable property present and future (except for his principal residence).
On the other hand, opposition does not prevent the universal transfer of assets which takes place on expiry of the opposition period.
Individual business The transfer of the cessation of activity. This shall be declared on the website of the company formalities office, within 45 days from the publication of the assignment in the legal advertisement medium.
From a fiscal point of view, this cessation carries the costimmediate taxation of profits carried out since the end of the last financial year for which payment of VAT.
Declaration of results
In order to allow the assessment to be made, the transferor must carry out a statement of result. The approach to be taken differs according to the taxation system company.
Company imposed in BIC
The transferor must make a statement of result No. 2031 in the 60 days from the publication of the assignment in a legal listing support.
Industrial and Commercial Benefits (BIC) Return [2024 Income Statement 2023]
Company imposed in BNC
The transferor must make a statement of result #2035 in the 60 days from the publication of the assignment in a legal listing support.
Non-Commercial Profit Reporting (NTB) - Controlled Reporting Regime
Company imposed on the SI
The transferor must make a statement of result #2065 in the 60 days from the publication of the assignment in a legal listing support.
The declaration must be made electronically, in accordance with the procedure of his choice:
- Either in EDI-TDFC mode, this is the transmission of declarations from accounting files, via a EDI partner (e.g. accountant, specialized contractor).
- Either in EFI mode, i.e. from its Professional area accessible from impots.gouv.fr (open) only for companies falling under the simplified system of taxation).
Value added tax (VAT)
If he is liable for VAT, the transferor shall to declare and pay VAT on all transactions that have not yet been reported at the date of transfer.
He shall be given the following time to make his declaration:
- If under the jurisdiction of simplified real regime : time limit of 60 days from the publication of the assignment in a legal advertisement medium.
- If under the jurisdiction of normal real speed : time limit of 30 days from the publication of the assignment in a legal advertisement medium.
Warning
However, this operation is exempt from VAT if the sale concerns all the components of the business and the purchaser is himself liable for VAT. The exemption then concerns all goods and services transferred on the occasion of the transfer of the fund.
At the time of the assignment, the assignor may carry out a professional added value which is the difference between the sale price and the original value of the company.
The applicable tax regime distinguishes between short-term capital gains and long-term capital gains.
Presentation of capital gains
Capital gains are referred to as " short-term where they arise from the transfer:
- elements of any kind acquired or created by the company since under 2 years.
- or ofdepreciable items detained since at least 2 years, for the part corresponding to depreciation deducted for the tax base.
Please note
The 2-year period is calculated day by day, since the date of entry into the asset company.
On the contrary, capital gains are referred to as “ long-term” where they arise from the transfer:
- non-depreciable items held since at least 2 years
- or ofdepreciable items detained since at least 2 years to the extent that the capital gains exceed the overall amount of depreciation deducted for the tax base.
Duration of ownership of the property | Non-depreciable items | Depreciable Items |
|---|---|---|
Less than 2 years | Short-term gain | Short-term gain |
2 years or more | Long-term gain | Short-term gain within the limit of the depreciation deducted (then long-term beyond) |
Taxation of capital gains
Short-term gain
The sum of the short-term gains and losses realized during the financial year shall constitute the short-term net gain.
Short-term net gain is added to taxable profit under the conditions and in the income tax rate (progressive scale of 0% to 45%).
The capital gain is also taxed at 17.2% under social security contributions on income from assets.
Individual business The spread taxation over three years in equal parts (over the year of implementation and the following 2 years).
Long-term gain
The long-term net capital gain is subject to the flat-rate levy (PFU) at the overall rate of 30%, which is broken down as follows:
- 12.8% in respect of income tax (IR)
- 17.2% social security contributions on income from assets.
Please note
The company may charge for any long-term losses that have been incurred in the previous 10 financial years on the long-term net gain realized in respect of a financial year.
In case of death of the farmer, established capital gains shall be subject to the long-term capital gains tax system. A general netting shall be made between the gains and losses recorded, without regard to the length of detention elements fixed assets correspondents. Thus, where compensation reveals a long-term net gain, it is taxed at the overall rate of 30%.
FYI
There are several tax exemption schemes on professional capital gains.
Disposal price exemption
In order to benefit from the sale price exemption, the transferred company must be active for at least 5 years.
The capital gain shall be exempted in one of the following ways:
- Exemption from totality the capital gain, where the value of the items transmitted (excluding immovable property) is less than €500,000.
- Exemption partial the capital gain, where the value of the items transmitted (excluding immovable property) is between €500,000 and €1 000 000. The exemption rate is calculated as follows: (1 000 000 - Value of items transmitted) / 500 000.
If transfer price is equal to or greater than €1 000 000, no tax exemption shall apply to the capital gain.
Example :
Individual business A is sold for a price of €1 300 000. Among the items submitted is a building whose sale price is €620,000. Deducting this amount, the envisaged transfer is therefore equal to €680,000.
The capital gain realized on the sale is €110,000.
The exempt amount of the capital gain is: 110 000 x (1 000 000 - 680 000) / 500 000 = €70,400.
The capital gain will therefore be taxed at 110 000 - 70 400 = €39,600.
Exemption in case of retirement
A capital gains exemption applies in the case of retirement if all the following conditions have been completed:
- The professional activity has been carried out for at least 5 years. The activity may be of a commercial, industrial, craft, liberal or agricultural nature.
- The company ceded is a SMB.
- The transferor shall cease all functions in the transferred company, that is to say, all managerial and salaried activities within the company.
- The transferor shall assert his pension rights either within two years of the transfer or within two years prior to the transfer.
Warning
In the case of retirement, the capital gains exemption relates only to income tax, social security contributions and 17.20% remain due.
Exemption for VSEs on the basis of revenue
In order to benefit from the exemption, the operator has to carry out a professional activity since at least 5 years.
The capital gain shall be exempted in one of the following ways:
- Exemption from totality the capital gain, where the annual revenue is less than or equal to €250,000 (activity of buying and reselling or supplying housing) or €90,000 (provision of services or non-commercial benefits)
- Exemption partial of the capital gain, depending on the revenue and the activity company:
- Activity of purchase-resale or supply of housing. When revenues are greater than €250,000 and less than €350,000, the exemption rate is calculated as follows: (350 000 - Revenue) / 100 000.
- Provision of services or non-commercial profits (NBC). When revenues are greater than €90,000 and less than €126,000, the exemption rate is calculated as follows: (126 000 - Revenue) / 36 000.
Beyond these thresholds, the added value is not exempt country.
The amount of annual revenue shall be the average of the duty-free revenue for the financial years ended (reduced to 12 months where appropriate) during the preceding 2 calendar years the closing date of the year in which the capital gains are realized.
If the operator or business was several activities, revenue generated in all activities shall be taken into account.
Example :
An operator engaged in an activity ofpurchase-resale has realized, in year N, a capital gain from the sale of €70,000. Its accounting year shall coincide with the calendar year and its revenue shall be:
- Revenue N-2: €320,000
- Revenue N-1: €240,000
The average revenue for 2020 and 2021 is: (320 000 + 240 000) / 2 = €280,000.
The exempt amount of the capital gain shall be: 70 000 × (350 000 - 280 000 / 100 000) = €49,000.
The capital gain will therefore be taxed to the tune of 70 000 - 49 000 = €21,000.
FYI
Exemption is not cumulative pitch with the sale price exemption scheme (detailed below). However, it can be cumulative with the exemption of capital gains realized on retirement.
Who can help me?
The public service accompanying companies
Do you have a project, a difficulty, a question of daily life?
Simple and free - you will be called back within 5 days by THE advisor who can help you.
Transfer of the professional assets of the individual contractor
Tax system for professional capital gains
Income Tax System
Tax system for transfers of goodwill
Reduction in the registration fee
Elements included in the professional estate of the individual contractor