Still little known to the general public, Family Buy Out (FBO) is a process that allows free transfer of business between members of the same family. This system includes several techniques that we will study throughout this article.
Better understand how Family Buy Out works
FBO involves several processes like donation-distribution Titles that are passed on by the head of a company to his descendants. The process also involves tying the donation to the Dutreille Agreement that applies during the free transfer of business.
not only that, Because FBO also involves setting up a holding company by an heir which takes care of the balance as well as the takeover of the company by the heirs. In the latter case, the beneficiary gets the securities in a single batch, then he has to offer the balance to the other heirs in return.
What is charity?
Through this process, A business manager can transmit company securities in a single batch which can be offered entirely to the child recipient. That said, heirs don’t always get a lot. In this context, it is the responsibility of the child recipient to honor the payment of the balance with the aim of keeping the other beneficiaries reciprocal, although all descendants must receive the bonus during the transmission.
Therefore, it is necessary to assess the property at the time of donation. he said, The remaining payment can be made in cash, as long as the child buyer has credit. Otherwise, it is possible to set a deadline. If the latter is too long, the balance has to be automatically evaluated when the goods included in the lot increase or decrease by more than 25%.
What is the structure of a holding company?
As part of a family buy out, it is also possible for the heir-holder to use the securities received by him as well as the remaining amount in the holding company as contribution. This process opens the door to financial and fiscal benefits. As a result, it will have the possibility to request loans at the holding company level.
This process may enable him to ensure payment of the balance That he owes to other beneficiaries. Otherwise, he can use it to buy back the title transmitted to other heirs.
At the same time, the child buyer has the possibility of increasing the holding company’s remuneration for debt repayment through a third-party operating company.
Dutrell Treaty
This is a process that also occurs within the FBO framework. This allows you to avail tax reduction at the time of transmission. In this regard, the reduction can reach 75% when the contract involves sharing donations.
however, This approach is subject to terms of business manager and successor commitment As regards retention of titles, ie 2 years for the first and 4 years for the second.
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