Donation of the business to a family member

Verified 07 October 2024 - Directorate for Legal and Administrative Information (Prime Minister)

It is possible to pass on your business to a family member without asking for financial consideration. The donation is subject to the completion of several formalities to ensure the protection of the donor, the donee and creditors company.

Step-by-step approach

In his lifetime, the head of company can pass on his business in several ways:

  • Simple donation : in the presence of a single child, this act makes it possible to transfer ownership of the goodwill to an heir without financial consideration.
  • Donation-sharing : this consists of the head of company distributing his property among the members of the family (spouse, ascendant, descendant).
    One receives ownership of the fund and the others receive gifts of property and money. If the goodwill constitutes the majority of the assets, it is up to the recipient of the gift to compensate the other heirs by paying a sum of money, called payoff.

Furthermore, the Head of company may decide to give only the bare-ownership of its fund and to maintain its fundusufruct. Upon the death of the donor, the usufruct ceases and the donee becomes a full owner without having any additional right to pay.

The transfer of the goodwill entails the assignment of all the elements which constitute the goodwill. However, certain elements of the company are excluded from this transfer.

Divested Items

The donation of the goodwill involves the transfer of the following:

  • Clientele
  • Sign and trade name
  • Right to lease : the right to take over from the holder of a commercial lease, to occupy the premises and to 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, e.g. pharmacies or beverage outlets.
  • Furniture
  • Hardware and tooling : the assets needed to operate the fund (machinery, computers, offices).

Please note

It is advisable to determine precisely which are the goods included in the transfer to avoid potential disputes. For example, the stock of goods is not included in the value of the goodwill, it is valued separately.

The donation 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.

Please note

The donor may use a FranceNum activator (digital expert) to be accompanied when selling its digital assets.

Items excluded from disposal

On the other hand, the transfer of the goodwill does not understand the following:

  • Claims and liabilities : debt repayment obligations and operating debts are not transferred, they remain the responsibility of the transferor.
  • Building : the premises in which the fund is operated.
  • Miscellaneous Contracts : For example, a supplier contract, except for lease, work, and insurance contracts that are automatically passed in.
  • Books of commerce and accounting documents : these documents are not transmitted, they only have to remain at the disposal of the purchaser for 3 years.

Please note

The transferor may provide with the acquirer that the transfer of the goodwill also include the transfer of such other items, including debts and premises (if owned).

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
  • 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.

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

Who shall I contact

When a donation is made, the tax administration collects a called tax gift right.

This right of donation is in principle at the expense of the beneficiary of the donation. However, the deed of assignment may provide that payment of the fee shall be borne by the donor. In this case, the amount of the duty shall not be considered as a donation supplement.

To calculate this tax, the registration department proceeds as follows:

  1. It takes into account the value of the gift.
  2. He then deducts from this first value the amount of any deductions.
  3. Finally, it applies a tax scale (a percentage) to the value found.

The amount of the rebate and the tax rate vary based on kinship between the donor and the recipient of the donation (the donee).

Example :

A head of company transmits to his son a goodwill worth €320,000No, that's the value of the donation.

A donation to one of his children has 2 consequences :

  • A reduction of €100,000 applies, i.e. 320 000 - 100 000 = €220,000.
  • The scale of taxation shall be 20%.

Thus, the amount of the gift tax is 20% of €220,000, or €44,000 of right.

In addition, 2 specific reductions may also be applicable in the case of a transmission of company.

Pact Dutreil

The transmission of company is facilitated by the Dutreil device which gives the right to a partial exemption of the right of donation, up to 75% the value of the company.

In other words, only a quarter (25%) of the value of the company will be taken into account to calculate the amount of the gift tax.

The Dutreil Pact applies if 4 cumulative conditions are respected:

  • The donor held the company for at least 2 years. No time limit shall be imposed if he has created the company transmitted or if he has acquired it himself free of charge.
  • Each recipient of the gift undertakes to keep the company and the assets allocated to it for Four years.
  • One of the beneficiaries must undertake to carry on the company's activities for 3 years from the time of transmission.
  • The main activity of the company is commercial, craft, industrial, agricultural or liberal, excluding any activity of management of its own movable or immovable property (e.g. SCI).

Early transmission

If the donor is older than under 70 at the time of transmission, reduction of 50% applies to the amount of the gift tax. In order to benefit from this mechanism, the transmission must comply with the same conditions as those laid down for the Dutreil Pact (nature of the activity, duration of detention, continuation of the activity, etc.).

FYI  

The anticipated transmission device is cumulable with the advantages of the Dutreil Pact and any deductions linked to the relationship.

When transmitting his or her goodwill, the head of company 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.

Who shall I contact

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.

Income Tax Return - business Tax (SI)

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.

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.

Get a phone call with an advisor