How can I save on taxes when passing on my company?
If an excessive tax burden were to be incurred when transferring the company, it may lead to the company not being able to survive a change of ownership. While owners of a sole-tradership or partnership benefit from privileged tax rates on liquidation profits, they may still incur taxes and social security deductions of 15 to 25 percent on the sale profits. It may therefore be worth converting a sole-tradership into an incorporated company no later than five years before any planned sale.
With a few exceptions, owners of incorporated companies do not need to pay tax on profits from the sale of their shares. However, buyers do not usually wish to acquire any assets which are not necessary for the running of the company. As such, any superfluous liquid assets and other assets not required to operate the company should be transferred out of the company in good time into the owner’s private assets in the most tax-efficient way possible.