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Passing on a business


In order to ensure that companies continue to exist and remain stable, there are several measures that encourage business owners to pass on their business to their relatives.

  • In which form should a business be given to one's children?

    • A business owner who wishes to pass on the ownership of their business without receiving any financial consideration will choose to make a gift .

    • If there is only one child, the gift will be classified as a simple gift. If there are several children, an inter vivos division among the presumptive heirs [ donation -partage] will be advisable; this is the only way to ensure that the assets concerned are valued definitively on the day of the transfer and are not revalued on the death of the donor.

    • There are many different possibilities: shares in the company can be given to all of the children; or only one of them, with the other children receiving other assets (such as real estate); or finally, if the business is the donor's sole asset, it may be given to only one child, who will then have to compensate the others by making a balancing payment (the donee may be allowed a certain amount of time in which to make the payment).

  • Can a one-person business be passed on?

    • Yes, this is perfectly possible, whether it is an artisanal or commercial business or an agricultural holding.

    • However, because it constitutes a single entity, made up of intangible assets (customers, right to a lease, trade name, sign, patent, etc.) and tangible assets (tools, equipment, etc.), it can only be given in its entirety.

    • Conversely, the rights in a company have the advantage of being able to be passed on gradually. This is why it will often be advantageous to transform a one-person business into a company before the transfer is made.

  • How can a business owner ensure that they receive income after the transfer?

    • One should not lose sight of the fact that for the business owner, a new life is beginning i.e. retirement. It may be appropriate to pass on the business in such a way that it still provides the owner with an income. With the assistance of a notaire, several possibilities may be envisaged:

      - The gift may be combined with a sale. There is nothing to prevent a person from giving their children only some of the shares in the company while selling them or retaining the remainder;

      - Ownership of the shares may be split. The bare ownership of the shares may then be passed on to the children, while the business owner retains the usufruct . The company's turnover must be sufficient to ensure that the transferor has an income, as does the child who receives the bare ownership of the business;

      - The business's real estate may be separated from the rest. If the business owner owns the premises in which the business is operated, they may create a real estate company [société civile immobilière (SCI)] and transfer the real estate assets to it. The SCI will then lease the premises to the business and the beneficiary will retain a source of income in the form of the rent received by the SCI.

  • What will be the tax cost of the operation?

    • By combining several provisions, a business owner can pass on their business to their children without paying any tax on the operation.

      - Each parent has an allowance of €100,000. This means that a business worth €200,000 may be given to two children without attracting any transfer taxes.

      - The children may also enter into an agreement, known as a "Dutreil agreement". Under this scheme, 75% of the value of the business will be exempt from inheritance or gift tax (see Dutreil Scheme and passing on family businesses). Penser à faire le lien

      - If the value of the business so justifies, it can be passed on in tranches. This will make it possible to optimise the parent/child allowance, which is reconstituted every 15 years.

  • Is it possible to give one's business to the employees?

    • It is sometimes difficult to find someone to take over a business, especially if it is very small. In order to save the activity and preserve the jobs, the owner may choose to transfer the business, without consideration, to one or more employees.

    • Thanks to the tax advantages, this option is stress-free. If the employee has had a full time, indefinite term contract for more than two years, or an apprenticeship contract, they will have the benefit of an allowance of €300,000 when the transfer duties are calculated.

    • The allowance applies to gifts of artisanal and commercial businesses, of clients of professional practices and of shares in companies that carry on an industrial, commercial, artisanal or professional activity. Business owners who have children should, however, take note: the gift must not infringe the children's rights.

    • The law requires a minimal share of the assets to be bequeathed to the children. This is known as the reserved portion [réserve héréditaire].

    • In consequence, if the business is the business owner's sole asset of any value, the children will have to give up their rights. Failing this, they may bring proceedings to have the gift that was made of the business reduced. Solutions can be found to this problem with the assistance of a notaire.


The passing on of a business is a major milestone in the life of the owner. Even if the law has created favourable conditions for business transfers, the owner should give a great deal of thought to their decision, as each solution has significant legal and tax consequences. The notaire should be the first port of call for owners who are contemplating such a step.

See also


French property market report / N°31