Transfer of the business to a family member

Verified 01 January 2024 - Legal and Administrative Information Directorate (Prime Minister)

You have the opportunity to pass on your business to a member of your family. The assignment is subject, after the signature of the deed of sale, to the fulfillment of many formalities. The purpose of these formalities is to ensure the protection of the transferor (you), the transferee (the transferee) and the creditors of the fund.

The sale of the goodwill involves the transfer of the following items.

Intangibles

  • 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
  • Employment, insurance and publishing contracts
  • Property rights literary, artistic and industrial (patents, software, trademarks, domain name)
  • Licenses or administrative authorizations for regulated businesses. For example, pharmacies or beverage outlets.

The transfer of a goodwill may also include the transfer of digital fund elements, crucial for the continuity of the company:

  • Domain Name and linked business email addresses
  • Website
  • Accommodation contract
  • Google My Business (GMB)
  • Client File and audience analysis services (e.g. Google Analytics)
  • Social media accounts (Facebook, Twitter, Instagram, LinkedIn)
  • Account on a marketplace or a booking tool (e.g. Amazon, Cdiscount, Booking, Tripadvisor...)

These digital elements enable the purchaser toaccelerate its implementation local and on the internet. They may do so be valued on the transfer of the goodwill.

Please note

You can use a FranceNum activator (digital expert) to be accompanied when selling your digital assets.

Body parts

  • Furniture
  • Hardware and tooling : property required for the operation of the fund (machinery, computers, offices)

It is advisable to determine precisely which are the goods included in the transfer to avoid possible disputes between heirs.

The stock of goods is not included in the value of the goodwill, it is valued separately.

The transfer of the goodwill does not understand the following:

  • Claims and liabilities : loan repayment obligations and operating debts are not passed on, you have to pay them
  • Building (premises in which the fund is operated)
  • Miscellaneous Contracts : (for example, supplier contract) except lease, work, and insurance contracts that are passed automatically
  • Books of commerce and accounting documents : these documents are not transmitted, they must only remain at the disposal of the purchaser for 3 years.

Please note

you and the purchaser may provide that the transfer of the goodwill also include the transfer of those other items, including debts and the premises (if you own them).

Registration Declaration

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.

You must submit to the registration department, on site or by mail, the following items:

  • Deed of transfer of the goodwill 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 registration fees (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

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Payment of registration fees

Registration fees are calculated on the transfer price as follows:

  • 0% up to €23,000
  • 3% between €23,001 to €200,000
  • And 5% beyond €200,000

The minimum registration fee is €25. If the sale of goodwill transaction includes sales of new goods, they shall be exempt from registration fees.

The cost of registration is at the expense of the purchaserHowever, there is nothing to prevent you from covering some or all of these costs.

Please note

The purchaser shall benefit from abatement of €500,000 on the value of the fund if it undertakes to carry on business and to ensure the effective management of the company for at least five years from the date of take-over.

The publicity formalities are mandatory and allow the transfer to be made enforceable against third parties.

Declaration in a legal advertisement medium

The deed of assignment must be published in a legal listing support in a 15-day period after the sale is signed. If it is an act of assignment under private signature, that publication must be preceded by its registration with the tax department responsible for registration. L'authentic instrument The transfer may be published before registration.

The advertisement must include the following information:

  • Elements concerning the registration of the document (office, date, volume, number)
  • Date of transfer
  • Surnames, forenames and domicile of the transferor (you) and of the transferee (the transferee)
  • Nature and seat of the fund
  • Selling price and breakdown between tangible and intangible items
  • Time limit for possible opposition by creditors

Publication in Bodac

The transferee must apply to the Commercial Court Registry within a period of 3 days after legal announcements have been inserted into the media. The Registry shall then publish an opinion in the Official Civil and Commercial Advertising Newsletter (Bodacc).

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To secure the sale transaction, the sale price is temporarily retained by a legal receiver (lawyer or notary of the transferee) for a period of 105 days from the date of sale.

Automatic receivership allows tax authorities and creditors to claim any money that was not paid to them before the assignment.

The receiver's fees and expenses shall be borne by the transferee, unless the bill of sale provides for a different distribution.

Immediate taxation of profits

The transfer of the company or business shall entail the immediate taxation of profits since the end of the last completed financial year until the date of transmission.

Profits will be taxed on income tax (IR) or business tax (SI), depending on your company's situation.

You must send the tax department (SIE), on site or by mail, a tax return in the 60 days from the publication of the assignment in a legal listing support.

Depending on the company's tax system, you will have to fill out one of the following forms:

  • Business Tax Return
  • Income Tax Return (BIC)
  • Income Tax Return (NTB)

Business Tax Return (SI)

2023 Income Statement 2022 - Industrial and Commercial Profits (BIC)

Non-Commercial Profits (NTB) - Controlled Reporting Regime

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Value added tax (VAT)

The transfer of the company or goodwill shall entail the payment of VAT perceived.

If you are liable for VAT, you must make a VAT return to the tax office (SIE) within a period of 30 days from the publication of the assignment in a legal advertisement medium.

This period is extended to 60 days if you are placed under Simplified Taxation Regime (SIR).

However, this transaction is exempt from VAT if the following 2 conditions are met:

  • The sale is for theentirety of the goodwill elements
  • The purchaser is itself liable for VAT
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During the sale, you can realize a capital gain which is the difference between the sale price and its original value.

We're talking about short-term gain if you have held the goodwill for less than 2 years.

Beyond 2 years, it is a long-term gain.

The taxation of capital gains differs depending on whether the company is subject to income tax (IR) or business tax (SI).

Subject to IR

If it is a capital gain short-term, the capital gain is added to taxable income under the conditions and at the rate of income tax.

If it is a capital gain long-term, the capital gain shall be imposed on the single flat-rate levy (PFU) at 30%, which means:

  • 12.8% income tax,
  • 17.2% in respect of social security contributions.
Subject to SI

There's no no distinction between short-term and long-term capital gains.

The capital gain shall be taxable at the normal rate of business tax.

It exists multiple plans exemption from capital gains tax.

Disposal price exemption

You benefit from a capital gain exemption depending on the selling price :

  • If the price is less than €500,000, your exemption is total.
  • If the price is between €500,000 and €1 000 000, your exemption is partial.
  • If the price is equal to or greater than €1 000 000, you do not have any exemption.

You must have been active in the company for at least 5 years.

Exemption in case of retirement

You benefit from a total exemption if you meet all of the following:

  • You have been in the business for at least 5 years
  • Your company is subject to income tax (not at IS)
  • You're leaving retired and you claim your rights within 2 years of the assignment
  • Your company includes less than 250 employees and has a turnover of less than EUR 50 million.

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

You benefit from a total exemption if you meet all of the following:

  • You have been in the business for at least 5 years
  • Your company is subject to income tax (not SI)
  • Your recipes are less than €250,000 (BIC) or €90,000 (NLC)

Above these thresholds, the exemption is partial if your recipes are:

  • Less than €350,000 (BIC) The exemption rate is calculated as (350 000 - revenue) / 100 000.
  • Less than €126,000 (BNC). The exemption rate is calculated as follows: (126 000 - revenue) / 36 000.

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