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What are your options for transferring business ownership?

If you are ready to retire, want to exit one business deal so that you may pursue another or simply want to transfer part of your stake in a Minnesota business to another individual, you have several options for doing so. Each comes with its own merits and pitfalls, each of which you should inform yourself of before making any final decisions.

According to the Small Business Association, there are four ways in which you may transfer the ownership of your business to another person or entity. The first is to outright sell it. If you opt to follow through with this option, you will transfer ownership immediately, receive the asking price in full and lose all ownership rights to the business immediately. 

The second option you have is a gradual sale. A gradual sale works more or less like a payment plan and is therefore a flexible option that benefits all parties. Once you transfer business ownership, you will receive a monthly income as usual but you will no longer have to worry about the daily responsibilities of running a business.

The third option is a lease agreement. If you and the other party agree to a lease, you would both be bound by a contract that details the payment and conditions the other party must make and meet in exchange for the temporary rights to your business.

The fourth and final option is to transfer your business to a family member. Though this may seem like the easiest option, it is actually the most complex. If you choose to pursue this option, you must deal with the tax implications of essentially "gifting" your business, which may prove to be more of a headache than gifting the business is worth.

Please do not construe the information in this post as legal advice. It is provided for purely educational purposes. 

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Dunlap & Seeger, P.A.
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Rochester, MN 55904

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