I currently own a business that is an LLC. I am giving the company to someone else, there is no monetary or other exchange, and they will be taking full ownership and responsibility. What is the best way to do this legally? They will be changing the name as well. Should they also be an LLC or this there a better option?
1 Answer from Attorneys
How this is handled depends. In most cases, it will be done through an asset purchase agreement where the buyer is buying the business assets and not the underlying entity. This is to avoid any unknown liabilities with the entity. In some cases, this can be problematic. For example, where the entity has acquired permits or licensing to operate and such a transfer will require new approvals. In those cases, it might be prudent to have the buyer purchase the LLC directly.
The fact that you do not intend to charge a price does not really matter other than with regards to formality, in which case we would still use some consideration like say $10.00. And also regards to tax realization. If there is value being conveyed but the sale is under that FMV then there could be a tax issue for the buyer. And there may also be sales or bulk transfer tax issues for the seller case depending.
How the new business is set up is not your matter, but they should have some liability shield and an LLC is probably the best bet.
If you need clarification, I suggest that you consult with a lawyer in private and discuss your objectives in more detail. You can start by calling around to several for a free phone consultation, get some insights then pick the best fit to work with.
If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.
Our firm is now referred by the American Bar Association (see under the New York section): http://www.americanbar.org/groups/delivery_legal_services/resources/programs_to_help_those_with_moderate_income.html
DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.
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