Finance

Can we pass our business down to our children for free without any tax consequences?

My husband is the sole proprietor of a business and I am the bookkeeper/receptionist. My two sons are HVAC techs and do the work that brings in the money. We are of retirement age and would like to just pass the business down to these sons instead of selling it to them. Would this be permissible with the IRS? Can we gift the business to them with no tax consequences to them or ourselves?
Opinions expressed by Entrepreneur contributors are their own.
A preliminary problem you have is that, as a sole proprietorship, your husband has no business to transfer. Whether the business goes to your sons or otherwise, if there's no separate entity, the business cannot legally exist without the owner (in this case, your husband). In addition, whether and how you can ultimately transfer an entity to your children tax-free depends on the form of entity, the (cost) basis in the entity, and your personal tax situation. I would suggest you consult with both an accountant and an attorney who are experienced in succession planning issues.

More from Entrepreneur

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

Whether you are launching or growing a business, we have all the business tools you need to take your business to the next level, in one place.
Enroll Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

Deciphering the Key Financial Metrics of a Business's Value