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How to Transfer Business Ownership

Updated December 20, 2023 | Written by Josh Sainsbury Reviewed by Brooke Davis

Many entrepreneurs launch a business with plans to own it for many years, possibly growing and expanding it into different areas. Others might find themselves looking to transfer business ownership — in part or whole — to someone else for myriad reasons.

For example, the venture may not generate the expected returns, and they may want to cut their losses by transferring business ownership to family members, friends, or another business owner.

Whether you’re the owner of a limited liability company, a corporation, or even a sole proprietorship, knowing how to transfer your business ownership to someone else can be helpful, especially if you ever find yourself in a situation where you need to remove yourself from your venture without necessarily closing shop.

• Ways To Transfer Business Ownership
• How Your Business's Structure Affects Transfers

Transfer Business Ownership FAQs

4 ways to transfer business ownership.

When you already know who you’ll be transferring your company’s ownership to, the process generally begins by drawing up a transfer of business ownership agreement.

Here are four ways business owners typically transfer ownership, each requiring different action steps and paperwork.

1. Sell the Business

Selling your business is the most common way to transfer ownership. You can do this in two ways:

• Cash Financing:  After agreeing on a valuation for your business and its assets, the buyer will buy your company upfront in cash using capital savings or a loan.
• Owner-financing Sale:  The buyer will purchase your company over time by paying installments.

In either case, you need to draft a business purchase agreement to record the sale and a bill of sale to transfer your ownership to the new owner officially.

2. Add New Partners or Reapportion Ownership

If you own a partnership or an LLC , you can transfer ownership by adding new partners or members who will pay for their ownership interests. After they buy the majority of your ownership interest, they will become the new owners of your company.

If you don’t want to add new partners or members, you can reapportion ownership by getting your partners to buy ownership interest from you.

Purchase Priority

Partnerships and multi-member LLCs usually state in their agreements regarding how ownership can be transferred. Typically, existing members or owners have priority in purchasing ownership before potential new owners can be brought in. Some agreements prohibit ownership interests from being sold to new owners and require them to be either sold back to the company or to fellow members.

3. Lease-Purchase

Lease-purchase is an excellent way of transferring business ownership to attract as many buyers as possible. Entering a lease-purchase agreement is an attractive and safe choice for many buyers since the lessee only pays for company ownership for the duration of the lease.

The lessee usually prepares a letter of intent and a good-faith deposit to indicate a serious interest in the business. This initial step sets the stage for detailed research into the company, leading to a binding lease-purchase agreement with a defined purchase price.

Once the lease period ends, the lessee — now the buyer — can then decide whether to renew the lease, buy the company, or terminate the relationship.

4. Gifting or Bequeathing

Gifting or bequeathing ownership stake to a relative or friend is a popular strategy for business owners, especially for passing on their legacy to their children.

Instead of bequeathing business ownership through a will (which only activates upon death), many business owners gift their ownership over time, allowing for a gradual transition and a smoother management handover. Moreover, this approach allows the owner to minimize gift taxes, as individuals can gift tax-free up to the annual exclusion threshold ( $18,000 as of tax year 2024).

Additionally, gifting partial business interests may qualify for valuation discounts. Trusts, such as revocable or irrevocable trusts (like GRATs or GRUTs), provide flexibility, income, and tax-efficient transfer options when gifting business ownership.

Gifting vs Bequeathing

A bequeath is property a person leaves to a beneficiary in their will following their death. A gift is given when someone is still alive.

How Your Business’s Structure Affects Transfers

Your company’s business structure determines how you can transfer business ownership. Each structure has its own steps and procedures.

Limited Liability Company

Transferring LLC ownership can be complex. While the process may vary by state, here’s the general process.

Step 1: Review the Documents

Look at your LLC’s articles of organization, operating agreement, and buy-sell agreement to see if there are any guidelines for selling the business. If these documents are silent on selling ownership, state laws apply.

Misunderstandings of the buy-sell agreement

A buy-sell agreement is NOT used to sell a business. Instead, the agreement stipulates what happens with the ownership of a company if something unforeseen occurs. Generally, it requires that ownership interests be either sold back to the company or to fellow members. It is typically drafted at set up or early in the business, and entirely new owners would not be part of the agreement.

Step 2: Negotiate Terms

Talk to the purchaser to determine what exactly they want to buy. Some buyers may only want to buy your assets, while others want to buy the entire LLC.

Depending on what the buyer is purchasing, use a business purchase agreement or asset purchase agreement to establish all the key facts of the sale, including:

• The timeline of the sale;
• The assets included in the sale;
• What is being purchased (specific assets, for example, or the whole LLC);
• The agreement and consent of all members with ownership in the LLC (unless stated otherwise in the operating agreement);
• Other relevant details about the sale of the LLC.

While a business purchase agreement outlines the terms of a business sale, it does not actually prove the transfer of the business or ownership.

Step 3: Transfer the Business

After you’ve determined what will be exchanged in this sale, write and sign a business bill of sale with the buyer to establish the transfer. State and local governments typically require a bill of sale as proof of ownership for transferring licenses, permits, and completing registrations. Without it, business ownership can be disputed.

Once you’ve completed the sale, notify your Secretary of State about the change in ownership to establish the transfer officially. Consult your lawyer about how to do this.

You also need to notify other parties, including:

• The Internal Revenue Service (IRS);
• Financial institutions where your LLC has accounts;
• Your LLC’s registered agent (the person or business that receives formal notices, documents, or letters for the LLC);
• States where your LLC has been registered.

Transferring business ownership of an LLC can have complex financial, tax, and legal obligations and requirements. In addition, the process and requirements vary by state. We highly recommend consulting an experienced business lawyer to help you manage the sale.

Sole Proprietorship

A sole proprietorship only has one owner — you.

Unlike an LLC or corporation, a sole proprietorship is an extension of its owner. Consequently, you can’t really sell a sole proprietorship, although you can dispose of its assets. After you sell your assets, the sole proprietorship will dissolve, and the buyer can use the assets however they’d like.

For example, let’s say you run a successful marketing firm as a sole proprietorship. You want to retire and find someone to buy your computers, customer list, and company name. You determine that your assets are worth $50,000, and you find a buyer who is willing to pay $55,000. You and the buyer can then draft and execute a sales contract.

Corporation

Ownership is based on the percentage of shares owned for S and C corporations. This means transferring ownership of either type of corporation can be done by selling, gifting, or bequeathing shares.

Keep in mind that  S corporations can’t have more than 100 shareholders , so a transfer of ownership will be prohibited if it creates more than 100 owners. If you transfer your S corporation incorrectly, it could jeopardize your election status.

If you’re looking to transfer all or part of your stock in a corporation, you may need approval from the board of directors and other shareholders. Following this, you should seek professional help from either an attorney or tax advisor to identify the best method and timing to offload your shares, which can maximize your sale price and minimize how much tax you pay.

You can find the requirements for selling your shares in the company’s shareholder agreement .

Partnership

A partnership involves two or more owners. Unless your partner or partners are also looking to transfer ownership or sell the entire business, you’ll likely want to relinquish your ownership portion.

Below are the steps for ownership transfer in a partnership:

• Look at your business’ partnership agreement . This document lists each partner’s share of the company.
• If you are transferring ownership to existing partners, talk to them and see how you can reapportion your ownership interest to them. If you are selling ownership to a new partner, use an assignment of partnership interest form to indicate the transfer.
• Transfer interests to other partners and amend the partnership agreement to reflect the transfer.

Depending on your jurisdiction, you may have to file forms with the state declaring ownership change.

How do I transfer ownership of a business to a family member?

One of the best options to transfer your business ownership to a family member is by gifting or bequeathing shares to them. You can do so tax-free if you annually bequeath $18,000 or less in value (as of tax year 2024).

How do I transfer ownership of a small family business?

It depends on the structure of the business.

If your small family business is a sole proprietorship, you can transfer business ownership by selling its assets. If it’s a partnership, you could transfer your interest to other partners. If it’s a corporation, you can transfer by gifting, selling, or bequeathing shares.

If your business is an LLC, you need to:

• Examine your LLC’s foundational documents for any guidelines on selling the business. If none, state laws will apply.
• Discuss with the buyer what they intend to purchase, whether it’s assets or the entire LLC. Use the appropriate agreement to detail the sale’s terms, including timeline, assets involved, member consent, and other sale specifics. Note that this agreement doesn’t prove the transfer of ownership.
• Finalize the sale with a business bill of sale, required for transferring licenses and registrations. Notify the Secretary of State and other relevant parties like the IRS, financial institutions, and registered agents about the ownership change.

Can I transfer an EIN to a new owner?

No, you generally can’t transfer an EIN to a new owner and will need to obtain a new EIN .

How hard is it to transfer my business to another person?

It depends on your business structure. A sole proprietorship, for example, doesn’t require permission from anyone else, making the process generally quick and easy. Selling an LLC, on the other hand, is more complicated as you have to abide by the agreed terms set out in the LLC operating agreement.

It’s important to understand that different types of transactions and business structures have different legal and financial ramifications. Generally, consulting with lawyers and accountants is essential to ensure all necessary steps are properly executed.

What happens to my business when I die?

What happens to your business when you die depends on the structure of your business.

An LLC will outline what happens if an owner dies in its operating agreement, such as allowing the business to continue operating under surviving members.

A sole proprietorship, on the other hand, can’t continue without you, but the assets can be sold or distributed as stated in your will or your state’s probate laws. Single-member LLCs would be similar to a sole proprietorship.

In corporations, you can either pass on your shares to your heirs or have other shareholders buy your ownership interest. In the latter case, your estate gets paid for this interest without transferring any stock ownership. However, the specific process depends on the terms set in the shareholder agreement of the corporation.

You can outline what happens when you die in your last will and testament, such as having your business turned into a testamentary trust.

► READ MORE: 13 Types of Will: Which One’s the Best for You?

Josh Sainsbury

Legal Content Editor

Josh Sainsbury is a business content editor at LegalTemplates. His background in a variety of industries allows him to create legal content that’s accessible and understandable for all audiences.

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How to transfer ownership of a sole proprietorship

How to transfer ownership of a partnership, how to transfer ownership of an llc, how to transfer ownership of a corporation, final takeaways for any business ownership transfer, templates and examples to download in word and pdf formats, how to transfer business ownership.

Owning, or being part of, a business can be great. Having a piece of the pie in any successful business, whether that means full ownership or just owning some interest, can be very financially rewarding. What happens, though, when you decide that you're ready to sell , or transfer, your ownership?

There are many different ways to transfer ownership interest in a business - and that's mainly because there are several different business model! Choosing the best legal structure for your business may be the first hurdle in owning a business, but if you've already owned one for several years and are ready to sell, what should you do?

In this guide, we'll cover several different ways to transfer the legal ownership of a business , depending on what type of business it is. Here, we'll walk you through some things to think about when deciding to let go of your ownership interest.

Please note though, this guide is for informational purposes only and shouldn't be construed as legal advice. Also keep in mind the laws on transfer of business ownership may be different in your state, so you should always check with a licensed attorney to get the best advice for you.

What is "ownership interest"?

"Interest" in a business simply means a percentage of the ownership . Interest is different across different business models. For example, in a corporation, interest is stock. In a Limited Liability Company, or LLC, interest is just a piece of the business. In a sole proprietorship, which is just one person operating as a business, interest is the whole ownership of the company.

What is "valuation"?

In this guide, we'll mention "valuation" a few different times. Valuation just means the financial value of the ownership interest at the time of sale - in other words, what the interest is worth! No sale can go forward without both parties knowing exactly what they're selling, which is why valuation is such an important concept in the transfer of business ownership.

A sole proprietorship is the least formal business structure. A sole proprietorship is, as mentioned above, just one person acting as a business . More importantly, a sole proprietorship has no formal business structure (in other words, often no formal documents filed with the Secretary of State) and in practice that often means that there isn't a lot of paperwork.

Separation of assets

The first step in transferring ownership of a sole proprietorship is to ensure that the sole proprietor has kept their personal assets and liabilities separate from the assets and liabilities of the business. This may not always be the case because many individuals choose a sole proprietorship exclusively because the structure is a lot more relaxed than other business forms. However, any buyer will want to ensure that they can properly value the assets of the business and therefore keeping them separate is critical.

If the sole proprietor has kept the assets and liabilities of their business separate, the next step in this sale will be to get a proper valuation on these from a neutral third-party. A valuation, as noted above, is just a fancy way of saying that the buyer and the seller can properly figure out how much the sole proprietorship is worth by adding up all of the assets and subtracting all of the liabilities. Importantly here, valuation will be both of physical assets, called tangible assets, and non-physical assets called intangible assets. Physical assets are things like any office space for desks or equipment, perhaps computers, or anything else that can be seen and touched. Non-physical assets, or intangible assets, are things like the goodwill of the business, which means how consumers feel about the business, the brand name (if there is one), and anything that can't be seen or touched that adds value to the business. Liabilities are things that subtract value from the business, like perhaps credit card debt or a small business loan, or maybe ongoing financial liabilities, like a lease.

Agreement for sale

After the business is fully valued, the parties will need to agree on a price . With a sole proprietorship, even after a valuation, this is a little bit more difficult than with other business forms, but a good valuation can really help. Once the parties have agreed on a purchase price of the business, generally a written agreement will be involved to ensure both of the parties know exactly what to expect and what is being transferred over in terms of the sale.

After the written agreement is signed, the seller will need to ensure that everything the buyer needs to run the business is properly handed over. This might include things like software licenses or a vehicle, etc. Importantly, the government documents and identification that are specific to the original business owner, like a tax ID or any business licenses, are generally not transferable in a sole proprietorship because the individual is the business. Therefore, the individual that sold the business will have to stop using anything like that and the new owner will have to get tax IDs and business licenses in their own name.

Final overview

Things to take into account when transferring ownership of a sole proprietorship:

1. Keep assets and liabilities separate.

2. Obtain a valuation.

3. Execute a written agreement.

Transferring ownership of a partnership depends on what type of interest is being transferred . Partnerships can have two forms: general and limited. A general partnership is generally what people think of when they think of a partnership: it involves two or more partners that have equal say, duties, and responsibilities in running the business and they share equally in the profits and losses, as well. A limited partnership is a type of partnership where there are some general partners but then there are also some limited partners who are only involved in terms of their financial investment. Limited partners don't have anything to do with the day-to-day running of the business.

The partnership agreement controls

Most often, the Partnership Agreement will describe exactly how the partnership interest may be transferred . In other words, there are no general state laws governing transfer of ownership in a partnership and this is something that the parties will decide beforehand, at the start of the partnership, when they're drafting the Partnership Agreement . The most common provision in a Partnership Agreement about the transfer of ownership interest will often say that the party wishing to sell must offer their ownership interest to the other partner or partners first before selling to an outside party. For a limited partner, the sale is often a little bit easier because they are only involved to the extent of their financial contribution. Therefore, limited partners are usually able to sell without as many restrictions - but again, the Partnership Agreement controls.

Valuation and sale

A general partner selling their interests will undergo the same sort of valuation process as in a sole proprietorship. The Partnership Agreement may cover exactly how the interest should be valued, or it may not. The parties may need to default to a neutral, third-party valuation expert.

Once the ownership interest has been valued, it can be sold to the buyer . For a limited partner, as noted above, often the transfer is slightly easier because of the limited financial interest. That process most often involves just an easy valuation and sale.

Amending the partnership agreement

No matter what type of partnership interest is sold, the Partnership Agreement will have to be amended to reflect the change in ownership. The buyer and seller of the interest may choose to finalize the sale through another document, as well, specific to the sale of interest.

Things to take into account when transferring ownership of a partnership:

1. Review the partnership agreement.

3. Decide whether to use an interest sale agreement.

4. Amend the partnership agreement.

Just like in a partnership, the terms of the Articles of Organization or LLC Operating Agreement (the two main governing documents of the LLC) will most often control exactly how (and if) the LLC interest can be transferred.

Single-member LLC

For a single-member LLC the practice of sale is very similar to that of a sole proprietorship. The reason for that is because in a single-member LLC, although this structure is generally more formalized than a sole proprietorship, very often the sole LLC member only has the assets and liabilities of the business to be concerned with. As in a sole proprietorship, any potential buyer would want to get a valuation on those assets and liabilities before purchase and ensure that the assets and liabilities have been kept separate.

To complete the purchase, a Business Sale Agreement can be used, along with LLC Membership Interest Assignment . These documents evidence the sale and the change in ownership.

After the purchase goes through, the documents filed with the Secretary of State, such as the Articles of Organization, may need to be changed.

Multi-member LLC

Transferring ownership in a multi-member LLC is different based on whether the entire LLC is being sold or just one member is transferring their interest.

If just one member is transferring their interest, usually the Articles of Organization or LLC Operating Agreement will govern exactly how the transfer needs to happen. LLC members own parts of the LLC, which together add up to 100% ownership interest. One of the LLC documents will usually state that for any member that wants to transfer their interest, they must offer it first to the other members, called a "right of first refusal."

A valuation may be needed if there is no information contained within the LLC documents on how to value the member interest for sale.

Even if one of the LLC documents does not contain a provision requiring the first refusal, it will usually cover any other conditions required for an interest transfer. The documents might offer restrictions on who can become a new member or how any sale of interest is approved.

If all of the LLC documents are entirely silent on how to transfer interest, individual state laws will apply. Usually, membership interest can be sold through an LLC Membership Purchase Agreement and then the buying party becomes a new member.

The Articles of Organization and LLC Operating Agreement may need to be amended.

For a multi-member LLC that wishes to sell the entire business, a Business Sale Agreement would be used. A valuation would need to be obtained for the whole of the business, instead of just one part, and the assets and liabilities would be transferred over, rather than just a percentage of the interest. In these cases, generally all LLC members need to consent.

Things to take into account when transferring ownership of an LLC:

1. Review the LLC Operating Agreement and/or Articles of Organization.

2. Obtain a valuation, if needed.

3. Execute the proper sale documents.

4. Amend the Articles of Organization and LLC Operating Agreement, if needed.

C Corporation

A C Corporation is that which most people think of when they think of corporations - the big businesses of America. In these types of business, transferring ownership is usually the easiest of all organized businesses, even though they are often the biggest and most complicated structures. The reason is that ownership in a C Corporation lies with the shareholders, also known as stockholders. These are individuals that are given stocks, or shares, in exchange for a piece of the ownership of the company.

To transfer ownership of a C Corporation, all that is needed is a sale of stock . Since C Corporations are such big business, they usually have free buying and selling of shares. Sometimes, the Shareholder Agreement or the Corporate Bylaws will restrict how the shares can be sold: for example, they may need to be offered to existing shareholders first. If that's the case, then the terms of the Shareholder Agreement will control and any new shareholder, if a new one comes in, will need to execute and abide by that Shareholder Agreement, as well.

A Share Sale and Purchase Agreement might also be used, depending on the parties. Shares are usually valued by their current market-value for C Corporations, meaning what they are currently going for on the open market, and they are "transferred," with the transfer of Stock Certificates, which are hard copy documents evidencing who owns the stock.

One thing to consider is that there may be different classes of stock, that come with different voting privileges. The buyer will need to ensure they are buying the appropriate class of stock for their needs, if it is applicable.

Things to take into account when transferring ownership of a C Corporation:

1. Find a buyer.

2. Execute a Share Sale and Purchase Agreement, if needed.

3. Transfer the stock certificates.

S Corporation

An S Corporation is similar to a C corporation in that there are shares, or stocks, but these are often "closely held," meaning that only a small group of pre-determined individuals can hold stock in the S Corporation. Because of this, there tend to be more restrictions on the sale of stock here than in a C Corporation.

The Corporate Bylaws or Shareholder Agreement might restrict what types of individuals can hold shares or whether businesses can hold shares, or even sometimes whether anyone outside of a family can. Therefore, one of these two agreements must be checked before any sale of S Corporation stock can be made.

If the Corporate Bylaws or Shareholder Agreement say that the prospective sale is permitted, then the stock will need to be valued, generally by a third-party, often with the assistance of an attorney. If the buyer and seller both decide to proceed with the purchase, a Share Sale and Purchase Agreement can be used to finalize the terms.

Finally, the S Corporation should ensure its books are updated to reflect the new ownership.

Things to take into account when transferring ownership of an S Corporation:

1. Ensure the sale is permitted under the Corporate Bylaws or Shareholder Agreement.

2. Have the stock valued.

3. Execute a Share Sale and Purchase Agreement.

4. Transfer the stock certificate, if any.

The many different structures available to business owners mean that there are many different ways to transfer ownership interest - which is often a benefit to owners! Most transfers of ownership, as noted above, require valuations and written agreements. It's important to keep in mind that the details of the transaction should always be clear between the person giving up their interest and the person obtaining it. Besides that, a licensed attorney in your state can help you with any business ownership interest transfers.

Things to take into account for all transfers of ownership interest:

1. Ensure the business documents permit the transfer.

3. Utilize the relevant written agreement for the sale.

About the Author: Anjali Nowakowski is a Legal Templates Programmer at Wonder.Legal and is based in the U.S.A.

• Partnership Agreement
• LLC Membership Interest Assignment
• Articles Of Organization
• Business Sale Agreement
• Corporate Bylaws

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Transferring Your Business to Someone Else? Here’s How to Do It

TABLE OF CONTENTS

In business, change is inevitable; and as a business owner, you’ll eventually have to transfer business ownership in part or in whole. Whether you come across new opportunities or develop different goals, experience a major life-changing event or are approaching retirement, a change of ownership will ensure your business endures even after you take a step back or step away.

When it comes time to transfer business ownership, think of the process as more of a life transformation than a mere transaction. It’s not just about cutting a deal, but also making a transition plan to guide you through the next phase in your life.

We’ll walk you through the basic process of how to transfer business ownership, how to transfer business ownership based on your company’s structure and tackle frequently asked questions. 

Questions You Need to Ask Yourself

Once you’ve decided that you’re going to transfer business ownership, you need to consider 4 key questions. These are:

• What will I do next?
• Can I get my asking price?
• How much money do I need?
• What do I truly want?

The first question is meant to ward off the feelings of regret that many business owners experience after selling their company or its assets. Your business is a huge part of your life, and after the transfer of business ownership, you might need to find new sources for the social and intellectual fulfillment your company provided.

Second, you need to learn — from a qualified professional — whether there’s a gap between what the market is willing to pay for your business and how much money you need. This feeds into the third question, which asks you how much money you need to live comfortably through your retirement or transition period.

Last, do a little soul searching to find out what you want from your next life chapter. Money is one thing, but chances are you want more than deeper pockets. Jot down what’s most important to you, and whether a change of ownership for your business will help get you there.

How to Transfer Business Ownership 

If you want to know how to change ownership of a business, your answer will depend on the kind of change you want to make. There are a few methods to transfer business ownership aside from an outright sale.

Selling the Business

To sell a private business, you have 2 options: an owner-financing sale or cash financing. In the former, the buyer purchases the company over time by paying installments agreed upon in the transfer of business ownership form. For the latter, the buyer pays for the company upfront in cash using a loan or capital savings after agreeing on a valuation for the assets.

Adding New Partners

Another method of transferring business ownership is to bring in new partners who will have to each pay for their ownership interests. Under this kind of arrangement, new shareholders buy into the company, typically with cash, to transfer the majority of the share capital out of your hands.

Giving It to a Family Member

A common method of relinquishing ownership of a business, especially for retirees, is to hand the company to a son or daughter or another relative. If you want to transfer business ownership to a family member, it could be done as a full or partial sale, but it can also be a gift. This transfer of business ownership can be completed tax-free if you gift shares of the company valued at $15,000 or less annually in regular installments.

Lease-Purchase Agreement

For intrepid buyers, entering a lease-purchase agreement is a safe choice. This is because the lessee is only entitled to the ownership of the company through the duration of the lease, after which the buyer can decide whether to buy the company, renew the lease or relinquish control.

Transfer of Business Ownership: A Basic Walkthrough

Imagine the following scenario: You own a limited liability company (LLC) and decide to bring in a new partner who will own 33% of the company for a cash price of $50,000. Now let’s go through the basic steps of transferring part of the ownership of an LLC.

Step 1: Navigate Regulatory Waters

First, you need to explore the regulatory restrictions placed on the transaction under state law. In some jurisdictions, you must report all changes of ownership in your business unless the state failed to record member names in the Certificate of Formation when the company was first incorporated.

A Certificate of Amendment must be issued to state authorities reporting the personnel changes if your name was recorded at incorporation.

Step 2: Update Operating Agreement

Next, you need to amend the operating agreement and all other internal documents to reflect the changes to management. Once you include the details about the change in ownership and the valuation of the investment, have the document(s) notarized.

Step 3: Issue Membership Certificate

In this scenario, a new ownership certificate must be issued within the first month and a half of the transaction that specifies that 33% of ownership has changed hands. The new owner must keep this certificate for the company’s books.

Can You Transfer Ownership of a Sole Proprietorship?

How is ownership transferred in a corporation.

The corporate structure of your company will determine how to transfer business ownership. The business organization impacts everything from how you file your tax return to how you execute and enter into contracts.

Transferring ownership of an LLC should be handled according to its buy-sell provision in the operating agreement. Each member of the LLC who wants out of the company must sell their share of the company to a buyer and draft a new operating agreement and Certificate of Amendment to update member names.

Partnerships

The operating agreement should spell out each partner’s share of the company. So when you change ownership of this business structure, each partner is free to transfer interests in the company to other members or amend the operating agreement to reflect a buy-sell agreement.

The Schedule K-1 tax form will articulate how ownership transfer has occurred at the end of the tax year.

C Corporation

For a C corporation, private business ownership is determined by the shares held by each owner. Each share’s value is evaluated to price the stock, and it’s then recorded in the company’s books. The seller must record a capital gain on the shares sold compared to the price at which it was originally bought.

S Corporation

An S corporation is like a C corporation with the main difference being that the former cannot exceed 100 shareholders and that all incomes and expenses are taxed through the owners and not at the corporate level. A standard transfer of business ownership agreement and a Schedule K-1 tax form reflecting capital gains and losses is all one needs to transfer business ownership.

Transfer of Business Ownership: Frequently Asked Questions

What happens to my company when I die?

In the event of your passing, the corporation lives on in perpetuity, so it’s important that you consult an attorney to arrange an estate plan. Having an estate or succession plan in place will provide power of attorney to execute your will after your death, such as if you want to transfer business ownership to a family member.

Your estate plan should include a new shareholder agreement that spells out who will own your interest in the company after your death. Then a Certificate of Amendment will be issued to amend the directors or members of the company.

Can you transfer an EIN to a new owner?

You can transfer an employer identification number (EIN) to a new owner if they don’t want to form a new corporate entity with your assets. If the new owner does want to start over after the transfer of business ownership, they must use their Social Security number to apply for a new EIN through the Internal Revenue Service.

How do I handle other elements when I transfer business ownership?

Consult your state’s regulations — and follow up with an attorney, if necessary — to ensure you’re following correct procedures for transferring a business license, trademarks, permits and anything else the business needs to legally operate.

How do I close the sale of the business?

To transfer business ownership and formally close the deal, have an attorney draft the buy-sell (or lease) agreement. Ensure that the agreement specifies precise terms, such as whether the assets will be purchased with cash, installments or with some money down. Upon both parties’ signatures, the agreement will be legally binding, and the ownership will have transferred.

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Business Transfer Agreement

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What is a Business Transfer Agreement?

A business transfer agreement is an agreement that governs the purchase of a business. The agreement is a contract between the business owner and the buyer. It may also be called a business sale agreement or a business purchase agreement.

A business transfer agreement will list all the physical, financial, and intangible assets that the current owner wants to sell. The contract also should also include the assets that aren’t going to be sold. The agreement will also list the liabilities that will be transferred, such as accounts payable, owed taxes, and outstanding loans.

Common Sections in Business Transfer Agreements

Below is a list of common sections included in Business Transfer Agreements. These sections are linked to the below sample agreement for you to explore.

Business Transfer Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm BUSINESS TRANSFER AGREEMENT , Viewed October 21, 2021, View Source on SEC .

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• Practical Law

Transfer of business

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Information about the Closing Loopholes changes

What is a transfer of employment?

On this page:

Introduction

Transfer of employment between associated entities, transfer of employment between non-associated entities, case examples.

Service with one employer will count as service with a second employer in different circumstances depending on the relationship between the two employers.

In this regard, it is important to determine if the employers are associated entities or not.

Service with one employer (first or old employer) will count as service with another employer (second or new employer) if two conditions are met:

• the second employer is an associated entity of the first employer, and
• an employee becomes employed by the second employer within 3 months of their employment being terminated by the first employer.[1]

What is an associated entity?

An associated entity is defined in s.50AAA  of the  Corporations Act 2001 .[2]

An entity (the associate) may be an associated entity of another entity (the principal) in the following circumstances:

• the associate and principal are related bodies corporate
• the principal controls the associate
• the associate controls the principal and the operations, resources or affairs of the principal are material to the associate
• the associate has a qualifying investment in the principal, has significant influence over the principal and the interest is material to the associate
• the principal has a qualifying investment in the associate, has significant influence over the associate and the interest is material to the principal, or
• a third entity controls both the principal and the associate and the operations, resources or affairs of the principal and the associate are both material to the third entity.[3]

The word  control  is defined in s.50AA  of the Corporations Act. One entity controls another when the first entity can make decisions that determine the financial and operating policies of the second entity.

Service with one employer (first or old employer) will count as service with another employer (second or new employer) that is  NOT  an associated entity of the first employer, if the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer.[4] The following flow chart will assist in determining whether the employee is a transferring employee.

Transfer of business between non-associated entities

Connection between the old and new employers

Transfer of employment

Non-associated entities – transfer of assets.

Hill v Sahir T/A Cafe Moderno at Fountain Gate [2013] FWC 668  (Roe C, 30 January 2013).

The employee worked for the old employer in a cafe. The business was purchased by the new employer. The employee worked 3 shifts for the new employer doing the same work before he was dismissed.

It was held that there was a transfer of employment, because there was a transfer of business between the old employer and the new employer. There was a connection between the old employer and the new employer as the transfer of business involved a transfer of assets. Further, as the new employer had not informed the employee in writing that his previous service would not be recognised, the employee’s service with the old employer counted as service with the new employer.

Non-associated entities – new employer ceased to outsource work to old employer

Thorne v Jura Australia Espresso Pty Ltd [2012] FWA 4954  (Cargill C, 14 June 2012).

The employee worked for the old employer, which provided labour to the new employer. After two years, the new employer ceased to outsource work to the old employer. The old employer terminated the employee’s employment, and she was employed by the new employer, but dismissed after about 3 weeks.

The employee was found to be a transferring employee in relation to a transfer of business. There was a connection between the old employer and the new employer because the new employer had ceased outsourcing work to the old employer. The employee was not informed in writing by new employer that previous service with the old employer would not count as service with the new employer, and therefore it did count.

NOT a transfer of employment

Non-associated entity – no relevant connection between employers, szybkowski v monjon australia pty ltd.

Szybkowski v Monjon Australia Pty Ltd [2010] FWA 7321  (Roe C, 17 September 2010).

The employee worked as a security guard for the old employer, which provided site security under contract. A tender process resulted in the new employer being awarded the contract. The employee was offered employment with the new employer but was dismissed the following month. It was held that there no connection between the employers, and therefore no transfer of business. As such, service with the old employer did not count as service with the new employer.

John Lucas Hotel Management v Hillie

John Lucas Hotel Management v Hillie [2013] FWCFB 1198  (Drake SDP, Hamberger SDP, Bull C, 22 February 2013), [(2013) 224 IR 260].

Decision at first instance [2012] FWA 6806  (Cambridge C, 10 August 2012).

The employee had been employed by the old employer to work at a pub. The old employer operated the pub under a lease with the owners. The old employer abandoned the lease, and the owners leased it to the new employer. The new employer employed the employee to perform the same duties, later dismissed her. On appeal, it was found that there was no connection between the old employer and the new employer, because there was no evidence of a transfer of assets in accordance with any arrangement between the employers.

Watson v Oliver-Ramsay Group Pty Ltd

Watson v Oliver-Ramsay Group Pty Ltd [2015] FWC 221  (Watson VP, 12 January 2015).

The employee had been working as a security guard for a contractor (the previous contractor) at Federation University in Ballarat for nearly eight years. A new contractor was successful in tendering for the provision of security services and offered a job to the employee. After working for almost three months, the new contractor advised the employee that they had decided not to continue his employment beyond the probationary period.

The employee lodged an application for unfair dismissal. The new contractor objected on the basis that the employee’s continuous service at the time of the dismissal was less than the minimum period prescribed by the Fair Work Act.

The Commission found that the previous contractor and the new contractor were not associated entities. There was also no transfer of business as there was no connection between the two employers. As a result, the employee’s service with the previous contractor could not be considered. As his period of service with the new contractor was approximately three months, the employee was not protected from unfair dismissal. The application was dismissed.

Associated entities

Employer was part of a franchise group – trustee company.

Salagras v Fingal Glen Pty Ltd atf the Adelaide Riviera Trust T/A Comfort Hotel Adelaide Riviera [2011] FWA 1401  (Steel C, 3 March 2011).

The employer was one of 3 different businesses owned by separate unit trusts with separate trustee companies. Each trustee company had the same single director and each trust had the same financial manager, who were both employees of a single accountancy firm. It was held that they were associated entities. Employees of the associated entities therefore counted for the purpose of determining whether the employer was a small business.

NOT associated entities

Employer had funding arrangements with other organisations.

Adams v Condamine Catchment Natural Resource Management Corporation Limited T/A Condamine Alliance [2010] FWA 5374  (Richards SDP, 22 July 2010), [(2010) 205 IR 230].

An employer was held not to be associated with other entities to which it provided funds under contract for the performance of project work, because this relationship was not such as to give the employer control over the other entities. Accordingly, the employees of the other entities did not count for the purpose of determining whether the employer was a small business.

[1] Fair Work Act s.22(7)(a).

[2] Fair Work Act s.12.

[3] Corporations Act s.50AAA(2)‒(7).

[4] Fair Work Act s.22(7)(b).

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What is a transfer of business under the Fair Work Act

For the purposes of the Fair Work Act, a transfer of business occurs when

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months of the termination, the employee becomes employed by the new employer;

(c) the work the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer; and

(d) there is a relevant ‘connection’ between the old employer and the new employer.

This is important because inter alia in circumstances which constitute a transfer of business in the statutory sense, applicable enterprise agreements which applied to  employees transferring to the new employer continue to be binding upon the new employer for those employees. They may also continue to apply to non-transferring employees of the new employer. In Community and Public Sector Union, NSW Branch v Northcott Support Living Limited [2021] 8 delivered 20 January 2021 the Federal court held that when determining (c) above the test does not involve a ‘technical’ comparison of the employee’s duties for the original and then the transferring employer rather the should focus should be upon whether the ‘fundamental nature’ of the employee’s work had changed from what it had been before for example work can still be regarded as the same or substantially the same despite

• the manner in which employees perform their duties may have altered;
• an employee’s new position may involve further duties or some functions of a position may no longer be required and so forth.

However if there are changes which are “material” or ‘fundamental’, the work will be regarded as no longer being the same or substantially the same which will be a question of fact and degree.

Her Honour Katzman J put it this way

• The meaning of “the same or substantially the same work”
• In order to answer the statutory question, it is first necessary to consider what is meant by the phrase “the same, or substantially the same work” for the purposes of s 311(1)(c) of the FW Act..
• I was informed by the parties that the meaning of the phrase has not been the subject of judicial consideration.  I was also informed that it was not used in the predecessor legislation, the Workplace Relations Act 1996 (Cth) (WR Act). It was common ground that little was to be gained by considering the same or similar expressions in different contexts, since the interpretation of the expression depends very much on the context and purpose of s 311.
• It is trite that, in order to discern the meaning of any word or phrase in a statute, one begins with the text but the text must be read in its context and that includes the legislative history and the statutory purpose or intention:  see, for example, CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ). Purpose is particularly important since s 15AA of the Acts Interpretation Act 1901 (Cth) requires that the interpretation that best achieves the statutory purpose is to be preferred over any and all other possible interpretations.
• As the CPSU submitted, by the inclusion of the words “or substantially the same” to qualify the work, the text makes it clear that an employee may be a “transferring employee” even though the work may have changed to some extent.
• I referred above to s 309 which describes the object of Pt 2-8.
• The CPSU submitted that the purpose of s 311 is to protect the terms and conditions of employment of the transferring employees. It argued that other provisions of Pt 2-8, specifically those in Div 3, are intended to provide for the employers’ interests in the efficient operation of their enterprises. They include s 319(1), which gives the Fair Work Commission power to make orders, including that a transferable instrument does not, or will not, cover the new employer and its transferring employee. In making such an order the Commission is required to take into account, amongst other things, whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace and whether the new employer would be significantly disadvantaged economically if it were covered by the transferable instrument covering the new employer: s 319(3). Similarly, s 320(2) gives the Commission power to vary a transferable instrument for certain purposes, including “to enable the transferable instrument to operate in a way that is better aligned to the working arrangements of the new employer’s enterprise”. The matters to be taken into account in making such an order are the same as those to be taken into account in considering whether an order under s 319(1) should be made: s 320(4).
• It is true that, based on a plain reading of the text, some provisions of Pt 2-8 appear to be directed towards one object of s 309 more than another. But I do not accept that only one of the objects mentioned in s 309 is relevant to the interpretation of s 311. Section 309 applies to the whole of Pt 2-8.
• It is clear from s 309 that the Parliament was concerned to strike a balance between potentially conflicting interests.  In like circumstances, Gleeson CJ remarked in Carr v The State of Western Australia (2007) 232 CLR 138 at [5] that the rule of interpretation in s 15AA may be of little assistance. His Honour went on to observe that “the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object”. So the question is not what the purpose is, but how far the legislation goes in pursuit of that purpose or object (at [7]). The court must rely on the text, construed according to such principles of interpretation as “provide rational assistance in the circumstances of the particular case” (at [6]).
• In determining the meaning of the phrase — “the same, or substantially the same work” —the legislative history provides some limited assistance.
• While the phrase may not have been used in the predecessor legislation, a virtually identical phrase appeared in Pt 22 of the WR Act — albeit in a different, though not entirely unrelated, context. Part 22 was inserted into the Act by the Workplace Relations Legislation Amendment (Independent Contractors) Act 2006 (Cth) and came into force on 1 March 2007. Part 22 introduced a suite of provisions to prohibit and penalise sham contracting and was self-evidently intended to protect terms and conditions of employment. Section 902, for example, prohibited an employer from dismissing, or threatening to dismiss, an employee for the sole or dominant purpose of engaging the employee as an independent contractor to perform “the same work, or substantially the same work” under a contract for services.  Section 903 prohibited a person who employed, or at any time had employed, an individual to perform particular work from knowingly making a false statement with the intention of persuading or influencing the individual to enter into a contract for services under which the individual would perform, as an independent contractor, “the same work, or substantially the same work” for the person. Sections 902 and 903 were re-enacted in the FW Act as ss 358 and 359. These provisions appear in Div 6 of Pt 3-1 of the Act.
• It is true that the phrase used in s 311(1)(c) is not identical, but the difference is inconsequential. It is merely a product of the grammatical construction of the paragraph. I was not taken to any authority dealing with the construction of s 358 or 359 or its antecedents. But in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR 346 at [95] the Full Court (North, Barker and Bromberg JJ) held that there could be “no doubt” that Div 6 of Pt 3-1 “seeks to address the same mischief as that addressed by Pt 22 of the WR Act”. The Full Court also held that “these provisions should be regarded as remedial and beneficial despite their penal nature”.
• In accordance with “the primary object of statutory construction”, s 311(1)(c) must be construed in a way that is consistent with the language and purpose of all the provisions of the FW Act, including ss 358 and 359: see Project Blue Sky Inc. v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]–[70] (McHugh, Gummow, Kirby and Hayne JJ).
• It has rightly been said that “‘substantial’ is not a word with a fixed meaning in all contexts”:  AE Terry’s Motors Ltd v Rinder [1948] SASR 167 at 180 (Mayo J). The online edition of the Macquarie Dictionary (accessed 6 January 2020) offers 10 different meanings, none of which seems to hit the mark.  The closest would appear to be “of or relating to the essence of a thing; essential, material, or important”.  In Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees Union (1979) 42 FLR 331 at 348 Deane J observed that “[t]he word ‘substantial’ is not only susceptible of ambiguity: it is a word calculated to conceal a lack of precision”. As it was said of the adjective, so it may be said of the adverb.
• Then there is the question of what is meant by the noun “work” as it appears in s 311(1)(c). The word is not defined in the Act. It follows that it is intended to have its ordinary meaning. But the meaning can vary. Some fifteen meanings are listed in the Macquarie Dictionary.  Relevantly, they include:
• Exertion directed to produce or accomplish something; labour; toil.
• That on which exertion or labour is expended; something to be made or done; a task or undertaking;
• Productive or operative activity.
• employment; a job, especially that by which one earns a living.
• On this question some guidance is offered by the Explanatory Memorandum to the Fair Work Bill 2008 (Cth).  As Gageler J recently remarked, having regard to their provenance and the circumstances in which they were created, explanatory memoranda for Government bills introduced into the Parliament can ordinarily be taken by the courts as reliable guides to the policy intentions underlying Government-sponsored legislation:  Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMU) [2020] HCA 29; 94 ALJR 818; 381 ALR 601; 297 IR 338 at [71]. The Explanatory Memorandum to the Fair Work Bill indicates that Parliament intended that a broad approach is to be taken to the meaning of “work” in the paragraph and that a narrow, technical construction is to be eschewed.
• The Explanatory Memorandum at [1217]–[1218] relevantly states:
• Under paragraph 311(1)(c), the transferring employee must perform the same, or substantially the same, work for the new employer as she or he performed for the old employer.  It is intended that this provision not be construed in a technical manner.  It recognises that, in a transfer of business situation, there may well be some minor differences between the work performed for the respective employers.  However, the requirement is satisfied where, overall, the work is the same or substantially the same – even if the precise duties of the employees, or the manner in which they are performed, have changed.
• Further, although paragraph 311(1)(c) is framed in terms of the work undertaken by an individual employee, in many instances a transfer of business occurs and a group of employees is engaged by the new employer.  In this circumstance, it may be possible to categorise the work more generally.  For example, if the old employer runs a supermarket and sells the supermarket to the new employer, the work might be characterised generally as retail work in a supermarket.  The fact that an employee may have stacked shelves for the old employer but now works on the checkout for the new employer would not stop the employee from being a transferring employee.

(Emphasis added.)

• In closing argument, counsel for the respondents accepted that s 311(1)(c) should be construed in a non-technical manner.
• I conclude that, in the balance between the objects in s 309, the primary purpose of s 311 is to protect the terms and conditions of employment under the relevant industrial instruments and prevent their avoidance in the event of a transfer of business to “an associated entity”. Having regard to that purpose, a narrow approach to the meaning of “work” is not called for.
• “Work” in the context of s 311 refers to the nature or character of the employment, rather than the particular duties the employee was undertaking or will or may be called upon to undertake. It is abundantly clear from the Explanatory Memorandum that that was the legislative intention. This interpretation serves the legislative purpose. As a matter of principle, focusing on the substance of the work, rather than the particular duties that may or may not be required or performed at any particular time, would not unduly interfere with the interests of employers in running their enterprises efficiently.
• It follows that I accept the CPSU’s submissions that the work performed by a transferring employee for the new employer may be the same, or substantially the same, even if some new duties are undertaken for the new employer, some duties formerly undertaken are no longer required, or the composition of the working day has changed, as long as the nature or character of the work remains the same or substantially the same.
• It defies common sense to think that a different construction was intended.  After all, as the CPSU argued, duties can (and often do) change during the life of a single contract of employment without altering the fundamental nature of the work.  Northcott itself recognised as much in its position descriptions, noting that the list of duties was “indicative only” and “subject to change”.
• A good example of such a case is Cresswell & Ors v Board of Inland Revenue [1984] 2 All ER 713 (Walton J). In that case a number of clerical assistants and tax officers employed by the Board of Inland Revenue objected to the introduction by the Board of the computerisation of the PAYE scheme which would have the effect that calculations formerly carried out by tax officers would be done by computer, all necessary documentation following an individual change of coding would be sent out automatically and, where there was a universal review of coding, all necessary alterations and notifications would be made or given automatically. The employees contended that the introduction of the computerised system would amount to such a change in the nature of their jobs that they were being asked to perform work under wholly different contracts without their consent. The employees’ contention was emphatically rejected by the court. At 721 his Honour said that “there can really be no doubt as to the fact that an employee is expected to adapt himself to new methods and techniques introduced in the course of his employment”, although, “in a proper case the employer must provide any necessary training or retraining”.
• In Cresswell, Walton J referred to O’Neill v Merseyside Plumbing Co Ltd [1973] ICR 96. In that case an employee who had been working for the best part of 25 years as a gas fitter and was directed to work at a hospital site as a general plumber argued unsuccessfully that the purported transfer to work of a different kind than that to which he was accustomed made his job redundant.

Consideration

• Applying this analysis to the facts of the instant case, the work the transferring employees perform as service coordinators is best characterised as a frontline management in a group home in which supported care and services are provided to the disabled.  Although their duties have in some respects changed, overall the work they are performing and are required to perform is substantially the same as the work they were performing as team leaders for NSL.
• Team leaders were and service coordinators are the senior employees working in group homes.  Team leaders were and service coordinators are the sole supervisors of support workers with immediate responsibility for the delivery of care to the employer’s clients or customers. Although the team leaders have additional responsibilities as service coordinators, most of their administrative and management responsibilities are the same as those they had previously.  They remain “responsible for managing the day to day operation of the unit(s) and providing direct support and supervision for Disability Support Workers”.  The fact that when they commenced employment with Northcott they were relieved from the constraints of the roster and most of the direct care was, and continues to be, performed only by support workers did not change the essential character of their work.  Nor did any of the other matters upon which Northcott relies.  As the position description for service coordinator indicates, the typical duties of the position include “provid[ing] direct support to customers as needed”.
• Ms Carpenter deposed that the only time a service coordinator should perform direct care is if all other options for completing the work have been exhausted.  She went on to say:

A gap in the roster could arise, for example, if a support worker calls in sick or a customer does not attend day programs.  Before stepping in to perform direct care work, the Service Coordinator is expected to contact casuals, the rostering team, agencies and other managers to attempt to find someone to cover the shift, or ask a support worker to stay back.  If the Service Coordinator exhausts avenues and cannot find anyone available, a Service Coordinator may then need to assist to provide support.  That is because we operate in an environment where if all else fails, we cannot leave customers without support.

• While this was no doubt the ideal, the evidence established that this regimen was not always followed.  Nor, having regard to the exigencies, could it have been.  For example, a “customer” having an epileptic fit, a psychotic episode, or just needing assistance to go to the toilet could not be left to his or her own devices while the service coordinator sits in the office trying to find a replacement for the support worker.
• Even if the matters upon which Northcott relies are considered together, it makes no difference.  Team leaders could have been called upon to undertake the additional tasks required of them as service coordinators.  The additional tasks were all well within the team leader position description.  Equally, they could have been relieved of roster duties.  There was nothing in the team leader position description which would have prevented that.  Indeed, the position description made no mention of team leaders working according to a roster.
• The fact that the transferring employees no longer undertake shift work is immaterial.  The work is substantially the same regardless of when it is performed.
• Ms Carpenter deposed that under the Community Living Award the remuneration for team leaders was set at an amount that included remuneration for providing direct care to customers on three afternoon shifts, two evening shifts and one weekend shift during each 28-day roster period. That is true. But this circumstance has no bearing on the application of s 311(1)(c).
• Contrary to the respondents’ submission, there has been no significant change to the organisational context in which the transferring employees carry out their work.  At all relevant times at least, Northcott has been a disability services provider providing accommodation, respite and in-home services to people with disabilities.  The changes to funding arrangements brought about by the introduction of the NDIS did not alter that.  In any event, those funding arrangements were in place when the employees were working as team leaders for NSL.
• As team leaders the transferring employees were frontline leaders or managers, despite the fact that they were also required to perform direct care for a certain number of hours in accordance with a monthly roster.  Like the service coordinators, they were the only supervisory employees working in the homes.  In both positions they acted as managers in those homes.  In both positions they conducted team meetings.  In both positions they had supervisory responsibilities with respect to casual staff.  In both positions they were involved in the preparation of rosters.  In both positions they liaised with internal and external personnel.  In both positions they inducted new staff.  In both positions they were involved in the recruitment process for support workers; only the extent of that involvement has increased.  When they were undertaking direct care as team leaders on the roster, they often worked alongside support workers.  In doing so, as Ms Carpenter admitted in cross-examination, they were expected to model best practice.  Both as team leaders and service coordinators, they were and are expected to lead by example.  The reallocation to service coordinators of some of the tasks previously carried out by CARS did not change the essential character or nature of the work of the former team leaders.
• The respondents relied on Ms Carpenter’s description of the team leader role of “a hybrid” of direct support work when rostered and “work associated with the administrative aspects of the role” when not.  But this description was misleading.  It overlooked both the central importance of the managerial and leadership features of the team leader’s work and the direct care required of service coordinators.
• It will be recalled that “the primary purpose” of the team leader role, according to the position description, was to “[lead] a team of disability support workers and manage the operations of supported accommodation and respite unit or in home support services to ensure delivery of quality person centred services”.  The primary purpose of the service coordinator role is no different.
• It will also be recalled that, in the “key objective of the position” appearing in the position description of service coordinator, practice leadership was defined as including conducting team meetings; one to one supervision; allocating and organising staff; modelling and coaching; and quality of life outcomes.  The equivalent duty in the list of duties was listed at point 7:

Provide effective supervision and mentoring of staff.

• Similarly, the first of the “key accountabilities” in the position description for the team leader position which was in force immediately before the transfer was:

Provide leadership, support and supervision to a team of disability support workers, models best practice and facilitates an open and fair team environment.

• It is tolerably clear from the evidence that “modelling” means role modelling or leading by example.  Training materials issued by Northcott included the following description of “a day in the life” of a service coordinator:

Coordinator will already be aware of which part of the day their support is most required.

Greet team and customers on entry role model minimal fuss with putting items away (not in common areas) sign in and step straight into assistance.

– Cooking – Personal care – Documentation – Customer interaction

– Cleaning – Appointments -Transport – Equipment Maintenance

Try to hold back opinions, rather seek to understand how and why things are done, work alongside team to support customers with daily living and working on strategies. Offer support where required.

In quiet and down times support for teams can be completed such as rostering, Emails, Monitoring shift reports, Plans are up to date, Working within budget – Petty cash, Liaising with stake holders. Staff supervision, team meetings and performance managing.

• This was followed by a description of what was meant by “leading by example”:

Ÿ             Be involved as much as possible whatever time is available during the day be it 10 minutes or 3 hours supporting staff and customers.

Ÿ             Utilise time to coach / mentor staff in development areas especially staff new to Northcott for at least the first month (see induction)

Ÿ             Build a rapport and relationship with the customers to understand the needs that would usually be directed down the formal channels by engaging on a day to day basis.

Ÿ             Increase in building positive interactions and desired behaviours demonstrating to staff Northcott values and excellent customer service.

• These descriptions accord with the evidence of the CPSU’s witnesses and are at odds with some of the evidence given by Ms Carpenter.  They are markedly similar to the work they performed as team leaders.
• It will be recalled that the team leaders undertook little additional training before they commenced employment as service coordinators.  Indeed, it appears from Ms Carpenter’s evidence that Northcott considered that they could walk straight into the job and receive training when it was convenient.  Furthermore, Ms Carpenter conceded in cross-examination that the training program Northcott planned to provide the transferring employees was part of its ongoing leadership training for all its leaders.  That includes those who were employed by NSL as CARs and whose work admittedly did not change.  And Ms Carpenter testified that it had been provided in the past to team leaders.
• Contrary to the CPSU’s submission, however, the fact that the team leaders were considered to possess the necessary skills, experience and qualifications for the service coordinator positions and were not required to undergo training before they were offered the positions with Northcott does not support the conclusion that the work involved was substantially the same, any more than the work of a judge can be said to be substantially the same as the work of a practising lawyer.  It is entirely neutral.  But the fact that some training was planned or contemplated does not derogate from the conclusion that the work the transferring employees perform as service coordinators was fundamentally or substantially the same work they had been performing as team leaders.  These days “upskilling”, further training or continuing education is commonly provided to employees without affecting the nature of their work or descriptions of their jobs.
• For the purposes of s 311(1)(c) of the FW Act, the service coordinator work is substantially the same as the team leader work. Consequently, I find that there has been a transfer of business under s 311 of the Act and that the copied State awards continue to cover Northcott and those employees of NSL who were team leaders and who are now employed by Northcott as service coordinators.”

Community and Public Sector Union, NSW Branch v Northcott Supported Living Limited [2021] FCA 8 delivered 20 January 2021 per Katzman J

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What Is a Transfer?

Types of transfers.

• Personal Finance

Transfer: Definition in Finance and Types

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

A transfer involves the movement of assets, monetary funds, or ownership rights from one account to another. A transfer may require an exchange of funds when it involves a change in ownership, such as when an investor sells a real estate holding. In this case, there is a transfer of title from the seller to the buyer and a simultaneous transfer of funds, equal to the negotiated price, from the buyer to the seller.

The term transfer may also refer to the movement of an account from one bank or brokerage to another.

Key Takeaways

• A transfer is the movement of assets, funds, or ownership rights from one place to another.
• A transfer is also used to describe the process by which ownership of funds or assets is reassigned to a new owner.
• Banking, brokerage, cryptocurrency, asset titles, and loan transfers are a few examples of domains and transaction types where transfers occur.

A transfer is a term that has a broad connotation among various industries and transaction types. Below are a few examples of how a transfer is triggered for an individual, group, or company.

In all cases, a transfer involves the movement of funds or assets and the possibility of assigning new ownership.

Bank Transfers

When an account holder moves funds from one account to another, say from a checking account to a savings account with a higher interest rate, or from savings to an IRA account , a transfer has occurred. The transfer does not have to be within the same bank. It can be an interbank transfer from one account held at Bank A to another held at Bank B.

Within the banking industry, funds can also be transferred cross-border through wire transfers from a domestic account to a foreign account, and vice versa. The receiving accounts could be held by the same account holder or could be owned by a different person or company.

Funds are normally transferred for purposes of financial planning, to take advantage of better investment rates, to make payments for goods or services, to bring up the required balance of another account, to gift someone or an organization, or to save money, among other reasons.

Brokerage Transfers

Investors normally transfer funds and assets from within or outside their brokerage accounts . An investor who needs to fund his investment account so that he can purchase more shares may choose to make the transfer from another investment account held with the same broker or held with another broker.

Most assets like company stock , bonds , certificates of deposit (CDs), mutual funds , etc. can be transferred in-kind from one investment account to another. These assets can also be transferred to another person or charitable organization as gifts. Money transfers can also be made from an investor's bank account to his brokerage account, and vice versa.

Payments and Cryptocurrency

In the payment space, a transfer involves moving money from one account to another. Internal transfers may include moving money from one account to another owned by the same individual or organization. Transfers between people include wires, but also e-payments like PayPal and Venmo.

In the crypto-economy, funds and cryptocurrencies are transferred frequently between users to public addresses where the funds can be accessed with a private key unique to each user. When goods and services are traded, the buyer would transfer, say bitcoins , from his holdings to the seller’s digital address. This is similar to any other market, whether brick-and-mortar or e-commerce, where transfers between sellers and buyers are what defines a market.

Cryptocurrencies can also be transferred from one cryptocurrency exchange to another exchange where they are deposited in an account also held by the sender or someone else that the seller is gifting or transacting with. Also, trading cryptos for fiat money also initiates some sort of transfer where the user can transfer money from his bank account to the exchange and buy coins with the funds.

Asset Title Transfers

Titles on assets like cars, land, and homes can be transferred when sold or gifted to an individual or corporation. When a homeowner sells his home to another, he needs to fill out the quitclaim deed or any other forms needed to transfer the title of ownership. A landowner can transfer his title to anyone or any corporation if he wants to. Ownership transfer can come about due to selling the land, gifting it, willing the title to a beneficiary , following a court order, or foreclosure from bankruptcy.

Even the ownership of a phone can be transferred if the mobile carrier permits it. In this case, the mobile phone, phone number, and the contract can be transferred to another entity that would take ownership of it and accept the legal responsibility of fulfilling the bill payments as they come due.

Loan Transfer

Loans can also be transferrable. For example, a homeowner with an assumable loan can transfer the mortgage to someone else like the buyer if s/he qualifies for the loan. This could be a win-win solution for both parties involved in the transaction. When a car is sold, the seller can transfer the title along with the car loan to the buyer if the buyer is found creditworthy.

Is There a Limit to How Much Money You Can Transfer Between Accounts?

While there isn't a law that limits the amount of money you can transfer between accounts, banks, financial institutions, and money transfer providers often have transaction limits. These limits can vary per day, per month, or per transaction.

How Long Does a Wire Transfer Take?

Domestic bank wire transfers may take up to three days in the U.S., but they are faster if the sender and recipient have their accounts in the same bank. International wire transfers usually take up to five business days.

How Do You Transfer a Car Title?

Transferring a car's title is quite a straightforward process. If you are buying a car from a dealership, the dealer will provide you with the car title if you are paying for the vehicle yourself. If you are financing the vehicle, they will send the title to the lender.

If you are buying from a private seller and they have paid off the vehicle, the current owner will sign the seller’s section of the title and give you a bill of sale. Then you have to submit the necessary paperwork to your local Department of Motor Vehicles (DMV).

The Bottom Line

In finance, a transfer refers to the action of moving money, assets, or ownership rights from one account to another, or from an owner to a new owner.

A transfer can involve moving money between two accounts owned by the same person, or it can involve moving money between accounts owned by different people. Unless you're transferring money internationally, bank transfers are usually free.

Besides money, every kind of asset can be transferred: real estate, car titles, stocks and other securities, intangible goods such as patents, and even loans.

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• Working, jobs and pensions

Business transfers, takeovers and TUPE

When a business changes owner, its employees may be protected under the Transfer of Undertakings (Protection of Employment) regulations ( TUPE ).

TUPE protection

TUPE applies to employees of businesses in the UK.

The business could have its head office in another country, but the part of the business that’s transferring ownership must be in the UK.

The size of the business does not matter.

When TUPE applies:

• the employees’ jobs usually transfer over to the new company - exceptions could be if the employees are made redundant or in some cases where the business is insolvent
• their employment terms and conditions transfer
• continuity of employment is maintained

To find out if TUPE applies to your transfer, talk to Acas (the Advisory, Conciliation and Arbitration Service) , Citizens Advice or, if you’re an employee, your trade union representative.

When TUPE applies

There are 2 types of transfer protected under TUPE regulations:

• business transfers
• service provision changes

Transfers within the public sector are not usually covered by TUPE but some transfers from the public sector into the private sector are. However, public-sector employees get similar protection. Find out more about staff transfers in the public sector .

Business transfers

This is where a business or part of a business moves from one employer to another. This can include mergers where 2 companies close and combine to form a new one.

The identity of the employer must change, to be protected under TUPE during a business transfer.

Service provision changes

This is when:

• a service provided in-house (for example cleaning, workplace catering) is awarded to a contractor
• a contract ends and is given to a new contractor
• a contract ends and the work is transferred in-house by the former customer

Employees are not protected under TUPE if the contract is:

• for the supply of goods for the company’s use (for example a restaurant changing food suppliers)
• for a single event or short-term task (for example a catering company being used for a large corporate event)

Only the employees who can be clearly identified as providing the service being transferred are protected.

A courier collects and delivers for a business, but the packages are picked up or delivered by a number of different couriers on an ad hoc basis. The courier is not protected under TUPE.

A cleaner is employed by a company that decides to use an outside cleaning company instead. They’re likely to be protected under TUPE.

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What is a Transfer of Interest?

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A transfer of interest is a transfer of ownership of any object, real property, or business entity from one party to another. Most often, though, this term refers to the transfer of one party’s ownership in a business, and it may refer to an interest in a partnership, a limited liability company (LLC), corporation, or other business entity. Generally the transfer will be executed through a transfer of interest agreement.

Though people rarely refer to it as such, every purchase that is made technically involves a contract, and through that contract a transfer of interest in property is made. The purchase of food from a supermarket is a contract that results in a transfer of the interest in the food from the supermarket to the purchaser. Likewise, the interest in clothes purchased at a store is transferred through a contract between the purchaser and the store.

These transfers can be made through an agreement to any terms, notwithstanding any special restrictions or legal stipulations on the type of interest to be transferred. The agreement just must clearly state the parties, the interest to be transferred, and the consideration being given for the transfer. Once the intent to make the transaction is manifested in the words or actions of the parties, the agreement is officially executed and the transfer is complete.

One in real property is often referred to as an “assessable transfer of interest.” This is in reference to the fact that because ownership in real property has tax ramifications, certain transfers require a revaluation of the property after the following tax year. Any conveyance of real property through deed, trust, or contract, as well as any lease with a duration of 20 years or more, fall under this category. The purpose for this is to ensure proper assessment of taxes on the transaction.

Similarly, there may be times in which the sale of a business entity will be deemed an assessable transfer of interest. This occurs when there is a sale of 50% or more of the business. This, however, is not generally the case in the event the transfer occurs through foreclosure or forfeiture, if the transfer is not subject to income tax, or if the transfer is among members of an affiliated group, among others. The tax ramifications of these transactions are so significant that governments generally require a reevaluation after the transaction's execution.

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• What is a Transfer of Control?

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Europe: Transfer of a business

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The qualification of a transaction as a "normal" supply of goods — as such relevant for VAT purposes — or as a transfer of a business or a going concern — out of VAT scope — is still a topic to consider. Over time, a considerable number of case laws on such topic have provided guidelines that have not always been persuasive and sometimes even inconsistent, and that, in many cases, have been influenced by contexts with elements of fraud. Moreover, in the Italian framework, many case laws have been affected both by the civil law rules and by the so-called alternativity rule between VAT and registration tax (i.e., one transaction cannot be subject to both taxes).

In this regard, the Italian Tax Authorities (ITA) and the tax court have intervened several times with contrasting interpretations, creating issues for taxpayers that, on several occasions, need to explore beforehand the tax characterization of given transactions (i.e., asset deal versus transfer of a going concern, (TOGC)). Indeed, while the sale of assets is subject to VAT (generally deductible by the purchaser), the TOGC is subject to Italian transfer tax. It is crucial under Italian law to determine whether the ensemble of assets transferred qualifies as a business unit. 

Considering a fragmented interpretative context in Italy, it would seem essential to refer to EU principles to correctly address each case from a VAT perspective.

From a Belgian VAT perspective, it's important to carefully analyze each transaction and, if needed, confirm the applicable VAT treatment with a ruling.

From a Dutch and UK context, unlike the Italian perspective, the application of the TOGC VAT exemption depends also on whether the nature of the transferred economic activity continues to be the same.

EU legislative framework

Article 19 of Directive No. 2006/112/EC (" VAT Directive ") states:

In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor. Member States may, in cases where the recipient is not wholly liable to tax, take the measures necessary to prevent distortion of competition. They may also adopt any measures needed to prevent tax evasion or avoidance through the use of this Article.

It seems clear that the EU rule leaves to the member states the possibility to derogate from the qualification of supply of goods by virtue of the intrinsic nature of some or all of the assets that may constitute a business.

The option given to the member states whether to classify a transfer of a going concern as a supply of goods has the objective of not burdening the financial resources of businesses where, in fact, the application of VAT on the transfer of a business could lead to situations of financial instability for the businesses involved in the transaction.

As is well known, the VAT Directive does not include any definition of a transfer, of a totality of assets or part thereof, and makes no explicit reference to the law of the member states for determining its meaning and scope, so that it must be given an autonomous and uniform interpretation throughout the EU. 1 In this regard, the Court of Justice of the European Union (CJEU) clarified that this concept includes any transfer of a business or an independent part of an undertaking, including tangible elements and intangible elements that, together, constitute an undertaking or a part of an undertaking capable of carrying on an independent economic activity. 2

As to the use by the transferee of the totality of assets transferred, the VAT Directive does not set forth any specific condition, except that the no-supply rule applies if the recipient is the successor to the transferor. This principle has been recently confirmed by the order issued by the CJEU in Case C-729/21, according to which, Article 19 of the VAT Directive must be interpreted as meaning that:

… it does not preclude a provision of national law which provides that the "transfer of a total or partial universality of assets" is not subject to value added tax, without making its application conditional on the recipient being the legal successor of the transferor.

Indeed, the succession does not constitute a condition for the application of the rule but is merely a result of the fact that no supply is considered to have taken place.

On the other hand, the recipient is not explicitly required to carry out the same business activity carried out by the transferor. The CJEU clarified that the transferee must, however, intend to operate the business or the part of the undertaking transferred and not simply to immediately liquidate the activity concerned and sell the stock, if any. 3

Italian legislative framework

In Italy, European legislation has been implemented by Article 2, paragraph 2, letter b) of Presidential Decree No. 633/1972 (" Italian VAT Law "), which places the transfers of a business and a going concern outside the VAT scope. This article provides that "contributions and transfers to companies or other entities … of business or going concern … shall not be considered supplies of goods".

The reasons behind the Italian legislator's decision to treat the transfer of a going concern as outside the VAT scope are manifold: from the difficulty of determining the taxable amount, to the futility of taxing an asset that, by its nature, is not supplied to a final consumer.

As may be observed, unlike the European provisions, Italian VAT Law does not refer to the principle of continuation by the transferee of the transferred activity.

From a domestic perspective, on the notion of business/totality of assets, the ITA (in line with the CJEU's case law) clarified that it must be given a broad interpretation, including transfers of lines of business/entrepreneurial units as well. In any case, the transfer must cover the going concern as a whole, intended as universitas of tangible and intangible goods, as well as the legal/economic relationships capable of allowing the performance of a business activity, and not just single assets constituting the same business. 4

A business as a going concern is characterized by the organization of goods destined to the performance of a business activity. In this sense, organization is intended as the ability of the entrepreneur to create and organize a functional and instrumental relationship between the assets destined to the business activity, with production/commercial capacity. 5

Unlike the wording of the VAT Directive, Italian VAT Law — as seen above — does not include any specific reference to the continuation by the recipient of the going concern transferred as a requirement of the going concern to be qualified as such. In this connection, the Supreme Court's case law would not seem to really capture this aspect. According to the Supreme Court, the transfer of a going concern from a civil law perspective, as well as for tax purposes, must be assessed based on objective parameters; to this end, the intention to break up the going concern acquired or to allocate it to a different production activity is not relevant, as the very nature of the transfer of an organized totality of assets is not altered by such intention. 6 The Supreme Court also stated that a transfer of a business occurs when the actual object of such transaction is the transfer of goods intended as a functional totality, capable of expressing in a forward-looking perspective their aptitude to the performance of a business activity. 7 Basically, according to the Supreme Court, the mere potential aptitude/suitability of the goods to be used for the performance of a business activity is sufficient for identifying a going concern; on the other hand, actual performance of a business activity seems to have no relevance. Similarly, according to the Supreme Court, no relevance should be given to the lack of transfer of financial, commercial and personal relationships. 8

The view of the Supreme Court, however, is not entirely endorsed by the ITA. The ITA's guidance would seem to be more in line with the wording of the VAT Directive and the view of the CJEU. According to the ITA, transfer of a going concern is an extraordinary transaction that generally entails continuity within the transferor and the transferee. 9

In this regard, the ITA ruled out the application of the no-supply rule to a transfer of a customer list, as this would not have autonomous production capacity. 10  Similarly, the transfer of a member list does not amount to a totality of assets capable per se of allowing the autonomous continuation of sales activities (through a digital platform). 11

On the other hand, the ITA recognized the transfer of a business as a going concern in a totality of trademarks, formulas, design, domain name and related intangible rights, as well as inventories. According to the ITA, these elements, when combined, represent an organization capable of performing a business activity ex se, as a whole. The relevant transfer, therefore, falls within the scope of application of the no-supply rule. 12

Based on the same reasoning as above, the ITA decided on the application of the no-supply rule in connection with the transfer of significant assets for the business, i.e., a pharmaceutical product's trademark, the relevant marketing authorization, the product dossier and remaining inventory. 13 On the other hand, the transfer of assets such as notes, loans, derivative instruments and relevant edging contracts, as well as participation in a governmental entity, not including employment agreements/agreements with contractors, consultancy agreements and the like, and any tangible or intangible assets, does not amount to a transfer of a business benefitting from the no-supply rule. 14

Along the lines discussed above, the notion of going concern relevant from a VAT perspective was the subject matter of three very recent rulings by the ITA. Notably, in all these rulings, the ITA concluded that there was no "going concern," thereby excluding the application of the no-supply rule set out in Article 19 of the VAT Directive:

• In ruling No. 315 dated 8 May 2023, the ITA ruled on a securitization transaction, whereby a company (Alfa) transferred to an SPV (Beta SPV) several cars that were previously leased to another company (Gamma), which used them for its car rental business. The transfer was aimed at segregating the vehicles, so that the proceeds deriving from the rental of these vehicles were destined to the payment of noteholders. However, the transaction did not entail the transfer of the leasing agreements in place between Alfa and Gamma, as Beta SPV and Gamma negotiated new leasing agreements. Furthermore, pursuant to a servicing agreement, Alfa was granted a mandate from Beta SPV to organize and managed the transferred vehicles in the interest of the bondholders.

The ITA, recalling its previous guidance and domestic case law, noted that the essential element of a going concern is the organization of the transferred assets, which demonstrates their aptitude to carry out a business, even where such assets need to be integrated in the transferee's entrepreneurial organization. Considering this background, the ITA concluded that the securitization transaction did not entail a transfer of a going concern. This is because, at the time of the transfer of the cars from Alfa to Beta, such cars should not be considered organized to carry out a business. The ITA attached relevance to the circumstance that the leasing agreements between Alfa and Gamma were not transferred to Beta SPV together with the cars, while Beta SPV and Gamma engaged in negotiations to conclude new leasing agreements. In addition, the ITA pointed out that the specific features of Beta SPV (i.e., its nature of SPV, its role within the securitization transaction and its limited corporate purpose) confirmed the lack of the organization requirement.

• Ruling No. 399 dated 27 July 2023, deals with a company (Alfa) engaged in the automotive industry that was facing a financial distress situation. Alfa entered into an agreement with a company belonging to another group (Beta), a key client of Alfa for the supply of electric components, with interest in ensuring Alfa's ability to perform the supplies of these components. Under this agreement, Alfa transferred to Beta's certain affiliates (a) certain goods (defined as Inventories in the ruling) that were destined to be scrapped, being directly delivered to a disposal site, and (b) certain patents and other intangible rights generated by Alfa in connection with projects carried out to the benefit of Beta (defined as Work Results in the ruling). Under this arrangement, Beta granted to Alfa a support payment aimed at preserving Alfa's business continuity.

According to the ITA, these transactions should not constitute, in the aggregate, a transfer of business concern, but should be qualified as separate VATable transactions. According to the ITA, the purpose of the overall contractual arrangement was not to transfer a going concern, but rather to preserve Alfa's business continuity and supply flows. In particular: (a) the Inventories were not capable of being used in Beta's business cycle, being destined to be scrapped according to the intention of the parties; and (b) the transfer of the Work Results was aimed at transferring the patents and other intangible assets resulting from the projects that Beta entrusted to Alfa. Accordingly, these assets should not be considered as allowing Beta to carry out a business activity.

• Finally, ruling No. 404 dated 28 July 2023, dealt with the transfer of a property complex used for touristic purposes. Such property complex included roads, dwellings, green areas, play areas, sport fields, infrastructure and service buildings (e.g., reception, buildings destined for business activities such as minimarket, restaurant, etc.). Such a property complex was owned by Alfa, which leased it to Beta, a property management company. Alfa was willing to sell the property complex to Epsilon, which would be assigned the leasing agreement with Beta. The transfer would cover no employees, equipment, licenses or administrative permits.

The ITA concluded that no going concern was transferred, based on the following reasons:

• First, the ITA quoted some recent decisions of the Italian Supreme Court on whether a lease agreement of a real property should be qualified as a lease of a going concern or as a "simple" lease of a real estate. 15 According to such case law, the key element to distinguish between leasing of a going concern and leasing of a real estate is the importance and relevance of the real estate, compared to the other goods and services in scope of the leasing.
• Furthermore, the ITA noted that the various immovable assets constituting the property complex were not characterized by the organization, that is the key feature of a going concern. In this respect, the ITA pointed out that the transfer covered neither employees nor financial/commercial relationships, and that the transferee did not have any employees and managed all aspects of its activities through third-party providers.

Belgian legislative framework

In Belgium, European legislation has been implemented through Articles 11 and 18(3) of the Law of 3 July 1969 implementing the VAT Code (" Belgian VAT Law "). These articles provide that a transfer, "whether for consideration or for free, in the form of […] a whole of assets or a branch of activity" is not a supply of goods or services for VAT when "the transferee is a taxable person who could deduct all or part of the tax if it were due as a result of the transfer".

Essentially, under the TOGC rules, the sale of (part of) a business will not be subject to VAT, if the following main criteria are met:

• Acquisition of (part of a) business: The contributed assets and liabilities must include the transfer of an entire business or of an autonomous part of a business with tangible and possibly also intangible assets, which, together, constitute an enterprise that can operate an autonomous economic activity. This condition needs to be fulfilled in the hands of the transferee.
• Continuation of the business: The transferee must have the intention to continue exploiting the activity of the transferor and not simply to liquidate the activity immediately.
• Transferee: The transferee must be a VATable person that could partially or fully deduct the VAT on the transaction if it were due. If the transferee is a partial VATable person, this condition should be met but it will trigger potentially VAT recapture costs on the acquired business.

Even if the terms used in the European legislation and the Belgian VAT Law differ somewhat, the concepts of universality of assets and branch of activity are autonomous concepts of EU law and should, therefore, be interpreted in the same way. In this context, Belgium provides rulings and guidance to interpret and apply TOGC rules, influenced by the CJEU's case law. In particular, we note the following:

• The transferee's intention to continue exploiting the activity of the transferor is an essential condition for the application of the TOGC rule (see above). However, it is not required that the economic activity that the transferee will pursue is the exact same activity that was pursued by the transferor (Administrative Guidance AOIF 46/2009; see also case C- 497/01, Zita Modes Sarl , §45).
• The transfer of all the assets or the branch of activity can be spread over time or by means of separate contracts (such as a contribution followed by a sale). It is required in that case that the various transactions are linked together as being part of the transfer (Administrative Guidance AOIF 46/2009).
• In some cases, disputes have arisen regarding whether a transfer involves only part of the business, thus impacting the application of TOGC rules. For example, the transfer of a finance lease activity can fall under the TOGC rules as being the transfer of a branch of activity (ruling 2018.1048 of 29 July 2019). Similarly, the tax authorities have accepted that the transfer of immovable goods and the corresponding finance lease could constitute a transfer of a branch of activity (ruling 2020.1540 of 26 October 2020). We also refer here to the recent case law of the CJEU (C-729/21, 16 January 2023) relating to the transfer of leased property (shopping center) that fell under the TOGC rules. 

The above highlights the need for careful consideration of each transaction's unique circumstances. Therefore, it is important to carefully analyze each transaction and, if need be, confirm the applicable VAT treatment with a ruling.

Dutch TOGC framework

In the Netherlands, a TOGC is exempted from VAT by Article 37d of the Dutch VAT Act and no specific transfer tax is due on such transfers (although a real estate transfer tax does exist). Aside from the following EU prerequisites, Dutch VAT law imposes no additional requirements for application of the TOGC VAT exemption:

• To transfer (part of) a totality of assets that forms a sufficient whole to allow the pursuit of an economic activity.
• That the person to whom the goods are transferred is to be treated as the successor to the transferor and have the intention to continue to operate the business or the part of the undertaking transferred.

In Dutch case law, the Dutch Supreme Court did provide some further detail on what is considered a transfer of (part of) a totality of assets that forms a sufficient whole to allow the pursuit of economic activity and when that can be considered continued by the transferee in the Dutch context. We will provide some further insights into two judgments.

In 2018, the Dutch Supreme Court held that for a transfer of machines that were being leased out, there was no continuation of (part of) a totality of assets even though the machines continued to be leased to the same lessees. 16 The Dutch Supreme Court considered this to be the case, because the nature of the economic activity changed, in spite of the continued lease. The reason was that the new lessor concluded new contracts with the lessees, with these contracts on several points diverging from the previous contracts and changing the (previous) legal position between the lessor and the lessees.

Along the same lines, in 2021, the Dutch Supreme Court held that a sale and leaseback transaction concerning an apartment block did not qualify as a TOGC. 17 In this case, a foundation (the seller) developed an apartment block, leased the premises to its tenants and subsequently sold it to a Dutch BV (the buyer) under the conditions that it leased back the apartment block to the seller, and that the seller could continue the sublease of the premises to the tenants and would conduct management services to the buyer (for the maintenance of the block). Although the transferred apartment block was leased back (hence a transfer of an economic activity) to the seller that initially owned the real estate, the Dutch Supreme Court considered that the buyer did not continue to operate the business (or part thereof) transferred by the seller. Instead, the Dutch Supreme Court argued that as the seller was now a tenant of the buyer and conducted management services vis-à-vis the buyer, it cannot be held that the seller transferred its (or part thereof) economic activity (i.e., the lease of the premises in the apartment block) to the buyer. Consequently, the TOGC VAT exemption could not be applied according to the Dutch Supreme Court.

In our view, a key takeaway for the application of the TOGC VAT exemption in the Dutch context is, therefore, whether, despite a totality of assets that forms a sufficient whole to allow the pursuit of an economic activity being transferred, the nature of the transferred economic activity continues to be the same.

UK perspective

The UK has implemented Article 19 of the VAT Directive by virtue of Article 5 of the Value Added Tax (Special Provisions) Order 1995/126 (SPO), which, unlike the Italian VAT Law, specifically requires that "the assets are to be used by the transferee in carrying on the same kind of business". 18

Therefore, for a sale of assets to qualify as a TOGC in the UK, the following conditions must be met:

• The transferee must actually use the transferring assets to carry on a business.
• Furthermore, this business must be of the same kind that the transfer or used the assets for.

As such, UK VAT law differs from Italian VAT Law and the VAT Directive, in respect of the requirements for a transfer of assets to be deemed as a TOGC, as the mere ability or suitability of the transferring assets to be used to carry on a business post-transfer is not sufficient; instead, the economic reality must be that the transferring assets actually are used to carry on the same kind of business.

Therefore, in addition to assets transferring, the continuance of the same kind of business is "the necessary second element" within the UK TOGC provisions, which is a test that should consider the transfer of the undertaking holistically (i.e., a substance over form approach) and the intention of both parties. 19

The UK added this additional requirement to prevent distortion of competition and/or tax evasion/avoidance, as permitted under Article 19 of the VAT Directive, available to all member states when exercising the option to implement the TOGC no-supply rule. The UK courts deem this additional requirement to the compatible with EU law. 20

When determining whether the "same kind of business" is being undertaken by the transferee using the transferring assets, the UK courts state that there must be "an overall assessment of the factual circumstances, which includes the intentions of the transferee". 21

In Intelligent Managed Services 22 (IMS), the upper tribunal in the UK found that, following a substance over form approach when analyzing the "same kind of business" test, 23 whereby the transfer of a business to a company that was part of a group, and that, post-transfer, was to make supplies internally to the group, could qualify as a TOGC.

IMS transferred its banking support services division to Virgin Money (VM), which in turn was part of the wider Virgin Money Group (VMG) VAT group. As VM's provision of banking support services was intra-VAT group (and, therefore, disregarded for VAT purposes), to be incorporated into the wider VMG VAT group's provision of retail banking services, the question was whether this could be deemed to be "the same kind of business." The upper tribunal found that, considering all the circumstances as to whether it was a transfer of assets or an undertaking, including the intention of the parties, the assets were being used for the same economic activity post-transfer and the VAT grouping rules could not prevent the TOGC provisions applying.

In summary, UK law provides for an additional TOGC requirement whereby the transferring assets must be used to operate the "same kind of business" post-transfer. What constitutes the "same kind of business" is the subject of extensive case law and consideration must be given to the substance of the business pre- and post-transfer and the intentions of both parties when evaluating if the TOGC condition is met.

There has been no divergence in respect of the UK TOGC provisions since the UK left the EU on 31 December 2020, either through legislation or the courts. Retained EU law, both domestic and CJEU decisions, remain relevant in the UK in respect of TOGCs in accordance with Section 4 of the European Union (Withdrawal) Act 2018.

Contributors to this article : Giulia Trabattoni , Senior Associate (Rome); Martina Tranzocchi , Associate (Rome); Olivier Van Baelen , Counsel (Brussels);  Kathryn Sewell , Senior Tax Advisor (London); Martin Morawski , Legal Director (Amsterdam); Thijs van Luijt , Associate (Amsterdam)

1   C-497/01, Zita Modes .

2   C-497/01, Zita Modes .

3   C-497/01, Zita Modes .

4   See Circular Letter No. 1997, n. 320

5   C-408/98, Abbey National .

6   Supreme Court decision No. 353/1990.

7   Supreme Court decision No. 24913/2008.

8   Supreme Court decision No. 9163/2010.

9   Ris. No. 417/2018.

10   Ruling No. 466/2019.

11   See ruling No. 609/2020.

12   See rulings No. 546 and No. 574/2020.

13   Ruling No. 151/2022.

14   See ruling No. 149/2021.

15   Supreme Court decisions No. 3888/2020 and No. 6067/2022.

16   Dutch Supreme Court, 28 September 2018, No. 17/00987.

17   Dutch Supreme Court, 29 January 2021, No. 19/00699.

18   Article 5(1)(a)(i) and Article 5(1)(b)(ii) of Value Added Tax (Special Provisions) Order 1995/126.

19   See paragraph 28 of HMRC v. Royal College of Paediatrics and Child Health et al. [2015] UKUT 0038.

20   See paragraph 40 of Intelligent Managed Services Ltd. v. HMRC [2015] UKUT 341 (TCC).

21   See paragraph 36 of Intelligent Managed Services v. HMRC [2015] UKUT 341.

22   Intelligent Managed Services v. HMRC [2015] UKUT 341.

23   See also Haymarket Media Group Ltd v. HMRC [2022] UKFTT 168 (TC)

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ECJ rules on the meaning of a "transfer of a business"

In Ferreira da Silva e Brito and others v Estado portuges (C-160/14) the European Court of Justice (the ECJ) considered the meaning of a "transfer of a business" under the Acquired Rights Directive (the Directive) in relation to a situation whereby a majority shareholder assumed significant functions of a former subsidiary, which had been wound up.

In the UK, the Directive is implemented by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).  As those familiar with TUPE will know, the Directive (and TUPE) protect employment rights on any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger.  A transfer for these purposes is defined as a transfer of an economic entity which retains its identity (meaning an organised grouping of resources) which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.

In February 1993, Air Atlantis (AIA), a company founded in 1985 and operating in the charter flights market, was wound up.  In the course of the winding up, Mr Ferreira da Silva e Brito and 96 other individuals were dismissed as part of a collective redundancy exercise.  From May 1993, TAP, the Portuguese airline and main shareholder in AIA, began operating some of the flights that AIA had contracted to provide over the period from 1 May to 31 October 1993.  TAP also operated a number of charter flights, a market in which it had not previously been active, as the routes concerned had, until then, been served by AIA.  In operating those flights, TAP used some of the equipment and assets that AIA had used for its business, in particular four aeroplanes. TAP also assumed responsibility for the leasing of those aircraft and took over AIA’s office equipment, as well as other assets.  In addition, TAP recruited a number of former AIA employees.

The applicants brought proceedings seeking reinstatement and compensation and the matter was ultimately referred to the ECJ to decide, amongst other things, whether the Directive (in particular Article 1(1)) covers a situation such as this where an undertaking is wound up by its major shareholder, which then takes on certain activities, uses certain equipment and employs former employees of the business.

ECJ decision

The ECJ held that the Directive would apply in this situation, as the circumstances here amounted to a transfer of a business. 

In deciding this case, the ECJ took account of various factors that ultimately meant that the entity in question retained its identity.  In particular, the ECJ considered what are often referred to as the “shopping list” of factors that were developed following the case of Spijkers where the ECJ listed the following matters as relevant to the question of whether an economic entity retained its identity:

• the type of undertaking or business concerned;
• whether or not its tangible assets, such as buildings and movable property, are transferred;
• the value of its intangible assets at the time of the transfer;
• whether or not the majority of its employees are taken over by the new employer;
• whether or not its customers are transferred;
• the degree of similarity between the activities carried on before and after the transfer; and 
• the period, if any, for which those activities were suspended.

In this case, TAP had replaced AIA in the ongoing charter flight routes and had acquired certain assets including aircraft leases.  It had also offered employment to a number of AIA employees, all of which showed that a “functional link” between the assets and staff, and the activities which they carried out, had been preserved.  As such, this allowed TAP to carry out the same activity.  It was irrelevant that they were integrated into TAP's structure and did not retain an autonomous organisational structure.  The presence of these particular factors was sufficient, in the Court’s view, that there was an economic entity that retained its identity and accordingly, the Directive would apply to protect the employees’ rights.

The ECJ also gave some guidance on the circumstances in which a national court is obliged to make a reference to the ECJ in relation to the Directive.  In the circumstances of this case, as there were both conflicting decisions at national level and difficulties of interpretation among member states, a final appellate court was obliged to make a reference to the ECJ for a preliminary ruling, in order to avoid the risk of an incorrect interpretation of EU law.

UK courts are required to interpret TUPE in line with the Directive.  However, this decision is unlikely to have any dramatic effect on businesses in the UK and the way in which TUPE is applied. It is also worth bearing in mind that this decision will not impact on the interpretation of a service provision change under TUPE, as this concept does not appear in the Directive. The case does, however, serve as a useful reminder of the key principles that have been established from various cases regarding the definition of a “transfer of a business” and in particular the factors that employment tribunals will need to take into account in deciding whether TUPE applies.

The guidance on the circumstances in which a national court of last instance must make a reference to the ECJ relates specifically to Article 1(1) of the Directive but may also be applied to other provisions of EU law, in which case we may see more referrals to the ECJ.

Filed under

• European Union
• United Kingdom
• Insolvency & Restructuring
• Womble Bond Dickinson (UK) LLP
• Transfer of Undertakings (Protection of Employment) Regulations 2006 (UK)
• Transfers of Undertakings Directive (2001/23/EC)
• Court of Justice of the European Union

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What is an IRA account?

Types of ira accounts.

• Benefits of IRAs
• IRA Contribution limits 2024

Choosing the right IRA

Withdrawals and distribution, ira accounts: types, benefits, and how to choose the right one.

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• An Individual Retirement Arrangement (IRA) is a type of retirement account for individuals that provides various tax advantages.
• Depending on which type of IRA you have, you contribute either pre- or post-tax dollars and invest the funds.
• IRAs come with more investment flexibility than 401(k)s, which are employer-sponsored plans.

IRAs are some of the best retirement plans for growing your nest egg through compound interest and investment opportunities. An IRA is just one of many retirement account options, and there are several types to choose from. The right choice will depend on your retirement goals, timeline, and expectations for future taxes. 

Here's everything you need to know about opening an IRA, contribution limits, tax advantages, and the best IRA investment strategies in 2024. 

Definition and purpose of an IRA

Individual Retirement Arrangements (IRAs) are retirement accounts for individuals to save pre- or after-tax dollars toward their post-working years. Like a 401(k), IRAs have compounding power that can help them grow significantly over time. 

"IRAs are simple and are an extremely easy investment plan to help save for your retirement years," says Wilson Coffman, CFA, the president at Coffman Retirement Group .

IRAs have many tax benefits and can allow you to invest funds in various assets. However, there are age limits on when you can withdraw funds (or face a penalty), and in many cases, the contribution maximums may be lower than on other retirement accounts. For example, 401(k)s allow you to contribute up to $23,000 annually.

You can't start withdrawing from your IRA until you are at least 59 1/2, or the IRS will charge you a 10% penalty fee. The purpose of this penalty is to discourage the misuse of funds and promote long-term growth for future retirees.

This rule has some expectations, as you won't be charged the 10% fee if you meet IRS hardship guidelines for a qualified, penalty-free withdrawal .

Opening and funding an IRA account

To open an IRA, you go through a brokerage or local back. "IRAs are extremely easy to establish and set up," Coffman says. "Most banks offer an IRA, and any broker will offer IRA accounts. There are also many investment firms, like Fidelity , that can offer investment platforms for online retirement savings accounts as well."  

Once set up, you'll fund the account using bank payments, checks, or an IRA rollover if you have a different retirement account or old 401(k). The best rollover IRAs offer direct rollovers or trustee-to-trustee transfer by contacting your existing plan's administrator.

You can also take a distribution and deposit it in your new IRA within 60 days.

Traditional IRA

This type of IRA is funded with pre-tax earnings. Contributions are tax-deductible; you'll pay taxes on the funds when you withdraw them in retirement. They're typically best if you expect your retirement tax bracket to be lower.

With Roth IRAs, you fund the account with after-tax earnings. This allows the money to grow tax-free, and you'll pay no additional taxes upon withdrawal. They're a good option if you predict your retirement tax bracket will be higher.

Original Roth IRA contributions (not the growth) can be withdrawn penalty-free at any point before you're 59 1/2, essentially acting as an emergency fund. That said, you'll get the most out of your Roth IRA by leaving the funds alone for as long as possible and contributing regularly. 

SEP IRAs are for employees of self-employed professionals or small businesses who are at least 21 years old and have worked for the employer for at least three of the last five years. They have much higher contribution limits than traditional and Roth IRAs and are taxed upon withdrawal.

All contributions from the employer to the SEP-IRA are 100% vested immediately. 

SIMPLE IRAs are another type of small business retirement account for self-employed individuals or businesses with 100 employees or less. Qualifying employees must also have made at least $5,000 in the last two years and expect the same amount in the current year.

Employers must match employee contributions dollar for dollar up to 3% of the employee's salary. Employee contributions are 100% vested immediately. 

Benefits of IRA accounts

Tax advantages.

One of the biggest benefits of contributing to an IRA is the tax advantages. Since IRAs can be funded with either pre-tax (traditional IRA) or after-tax (Roth IRA), you can receive one of two tax benefits: tax-deferred growth or tax-free withdrawals.

You deduct your contributions from your current taxes by funding your account with pre-tax dollars. During retirement, you'll only pay tax on the amount withdrawn, including the growth. This is especially beneficial if you predict you'll be in a lower tax bracket during retirement and, therefore, pay a lower tax rate on your contributions. 

After-tax contributions mean you pay tax now to receive tax-free growth and withdrawals later. You won't have to worry about moving to a state with a higher tax rate or diminishing potential gains. This tax advantage is best for individuals who predict their tax bracket will be higher during retirement. 

Potential for growth and compound interest

In addition to tax advantages, IRAs are known for their powerful wealth-building capabilities. Money in your IRA can be invested in securities like stocks, bonds, ETFs, and mutual funds. IRAs also grow with the magic of compounding.

With compound interest , the interest earned each period (month, year, etc.) gets added to your principal amount. This means the next time interest is calculated, it's applied to a larger amount, leading to faster growth over time. The longer your money is allowed to compound, the greater the growth potential. 

IRA Contribution limits for 2024

The IRS has set contribution limits on IRAs, but the exact amount depends on your age, your taxable compensation for the year, and the type of IRA you've established.

Annual contribution limits

Here's how IRA contributions break down for 2024:

Income limits and eligibility for a Roth IRA 2024

Factors to consider

Some factors to consider when choosing the right IRA include: 

• Investment strategy: Consider the investment strategy you prefer to grow your nest egg. Generally, the best IRA investment strategy for long-term wealth building is a buy-and-hold strategy, which mitigates risk and volatility while utilizing compound interest. However, some pre-retirees (particularly younger traders) may prefer an active, riskier strategy with the potential for higher gains. 
• Investment options: What kinds of investable securities do you want to buy and sell in your IRA? IRA companies offer a wide range of investment options, including stocks, bonds, ETFs, and mutual funds. Some providers offer alternative investment options like real-estate, art, and cryptocurrencies. 
• Fees and expenses: Ensure you understand all the fees associated with the IRA provider you sign up with. This includes account fees, annual fees, management fees, transaction fees, and expense ratios. Fees can diminish potential returns over time, so it's important to compare fees between different providers.
• Investment tools and research: Consider the kinds of investment tools, services, and research that can help you make smart investment decisions. These could include educational resources, portfolio analysis tools, tax-loss harvesting, and market research reports.
• Minimum investment requirement: Some online brokerages and apps require a minimum investment to open an IRA and start investing. There are many low-cost IRAs with no minimums and other more robust IRA providers with minimums ranging from $5 to $100. Before signing up, know how much you need to invest to get started.
• IRA match: Some IRA providers now offer an IRA match, similar to a 401(k) employer match. When you contribute to your retirement account, your IRA may contribute a matching contribution up to a certain percentage. However, only a handful of investment platforms offer this perk. 

Comparing traditional and Roth IRAs

The most common types of IRAs are traditional and Roth. They act very similarly, providing the same investment options and contribution limits. Most IRA providers typically offer both kinds to anyone with earned income.

Pre-tax dollars fund traditional IRAs, so you only have to pay income tax on the amount withdrawn during retirement. Whereas after-tax dollars fund Roth IRAs. That means you pay tax now for tax-free growth and withdrawals later on. 

Most people choose between traditional and Roth IRAs. According to Clark Howard, author and host of The Clark Howard Podcast , future taxes should play a big role in this decision.

"The biggest difference between a traditional IRA and a Roth IRA is the treatment of taxes," Howard says. "ln general, tax rates are likely to go up over the years no matter which political party is in power. That means it may make more sense to skip the tax deduction you get up front with a traditional IRA to avoid tax later by investing with a Roth IRA."

Our traditional IRA vs. Roth IRA comparison guide examines fees, investment strategies, tax advantages, and more to provide a closer IRA comparison. It's common for people to have both types of IRAs for double the tax benefits. 

However, a SEP or SIMPLE IRA may be a better option for small businesses or self-employed people. 

You'll want to wait until at least 59 ½ to withdraw funds on all IRA types. Withdrawals before this point face a 10% penalty, one of the most significant IRA withdrawal rules and penalties. There are some exceptions on Roth IRAs if you've funded it with a rollover, so talk to your tax advisor if you plan to withdraw early from this type of account.

The tax treatment of an IRA depends on the type of account. With traditional, SIMPLE, and SEP IRAs, contributions are tax-deductible, and you fund the account with pre-tax dollars. With Roth IRAs, you contribute post-tax dollars — or money you've already paid income taxes on. This allows for tax-free withdrawals in retirement.

"IRAs are either taxed at the beginning or the end," says Christy Matzen, CFP, senior manager and global planning for Northstar . "When you make a contribution, you can pay tax on the dollars before you put it into the account — this will let you take the money out tax-free, or you can take a tax deduction when you make the contribution, but then the money will be taxed when you take it out."

Required minimum distributions (RMDs)

Your Required Minimum Distribution (RMD) is the minimum amount you must start withdrawing from your IRA based on your birthdate. Generally, you must start withdrawing from your IRA by April 1 of the following year when you turn 72. If your birthdate is after December 31, 2022, then your RMD is age 73. 

After the first required year, you must continue making subsequent annual withdraws by December 31. How much you withdraw depends on the total value of your account and life expectancy. 

IRA account FAQs

The difference between traditional and Roth IRAs is that a traditional IRA is funded by pre-tax dollars, and a Roth IRA is funded by after-tax dollars. With a traditional IRA, you only pay tax on the amount withdrawn during retirement, which is especially helpful if you are in a lower tax bracket. On the other hand, Roth IRAs grow tax-free and have tax-free withdrawals, which is great if you expect your income to be higher in your post-working years. 

You can contribute up to $7,000 to a traditional or Roth IRA in 2024. Individuals age 50 or older can contribute up to $8,000. You can contribute up to $16,000 (or $19,500 if you're 50 or older) to a SEP IRA. For SIMPLE IRAs, you can contribute $69,000 or 25% of your compensation, whichever is less.

Anyone with earned income is eligible to open an IRA. However, you can only open one of each type. There are no age restrictions on IRAs either. For Roth IRAs, your modified adjusted gross income (MAGI) must be less than $161,00 for single filers to qualify (less than $240,000 for married couples filing jointly). 

You can start withdrawals from your IRA without penalties at age 59 1/2. There are exceptions to this rule, however, as certain hardship guidelines allow penalty-free early withdrawals. For example, the loss of a job or permanent disability may allow you to withdraw early from your IRA without incurring the 10% penalty fee. 

Required Minimum Distributions (RMDs) are the mandatory withdrawals you must start taking from your IRA during retirement. You must start taking RMDs by April 1 of the year following your 72 birthdate (73 if your birthdate is after December 31, 2022). 

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Five Things Companies Can Do Now That Chevron Deference Is Dead

The US Supreme Court issued its decision June 28 overruling the 40-year old Chevron deference, which required courts to defer to agency’s reasonable interpretations of ambiguous or silent statutes. So what is a regulated party to do now?

Number 1: Don’t panic. Just because a rule was previously upheld under Chevron doesn’t automatically mean it will be overturned.

Not every Administrative Procedure Act case was a Chevron case— Chevron only applied when an agency interpreted an ambiguous or silent statute, and even then, only in a comparatively formal manner. Chevron never applied where Congress expressly delegated an issue to an agency; where an agency’s interpretation came in informal, non-binding guidance; or where the agency was interpreting its own regulation.

Nor are the 70 Supreme Court cases or thousands of circuit court decisions holding “that specific agency actions are lawful” necessarily at risk of being overturned on a fresh post- Chevron look. The Supreme Court took pains to emphasize that those decisions “are still subject to statutory stare decisis despite [its] change in interpretive methodology.”

It’s not entirely clear what that means in practice. But even assuming that pre- Chevron decisions are back on the table, the only cases that would present a real risk of flipping are those where: the statute was silent or ambiguous at step one; the agency’s interpretation was reasonable at step two; and the agency’s interpretation of the statute was reasonable, but not the best. Not every decision would be safe, but neither would every decision be in mortal peril.

Number 2: Do consider whether existing rules are worth challenging.

That said, it’s not entirely clear what this guarantee of “statutory stare decisis ” actually means. At its narrowest, it simply means that parties can’t seek to reopen a particular case decided under Chevron just because it was decided under Chevron .

But what if the same statutory-interpretation question arises in a new context? What if the agency changes position on an interpretation previously blessed under Chevron ? We expect we’ll see lots of discussion about this in the weeks and months to come as litigants and courts struggle to make sense of this language.

While we work to sort that out, however, now is a great time to reassess whether to challenge existing rules or prior statutory interpretations. Most Chevron cases were decided at step two—studies put the numbers around 50% to 70% —meaning that if there’s a particular decision you dislike, odds are that it’s worth considering whether to revisit it.

And the Supreme Court’s decision in Corner Post —which will issue July 1—could also make that substantially easier than it was before. Previously, the APA’s general six-year statute of limitations might have posed a hurdle for many older rules, but the Supreme Court is considering in Corner Post whether to authorize a workaround to that general rule.

If a potential Corner Post exception doesn’t apply, you can also petition the agency to reconsider or reopen an older rulemaking. You can also disobey the rule and challenge its substance as a defense to an enforcement proceeding, but that approach carries with it additional risks.

Number 3: Don’t expect the agency to defend its prior approach.

One feature of Chevron was that agencies could select among a range of “reasonable” interpretations, meaning that statutory interpretations changed with the administrations. As Chief Justice John Roberts wrote for the court, “ Chevron foster[ed] unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.”

Now, there is only one best interpretation, and the court will decide what that is. If the agency leadership disagrees with the prior administration’s policy approach, don’t necessarily expect the agency to argue that the prior interpretation is the “best” one if challenged in court.

That means that litigation monitoring is even more crucial now. If a rule affecting your organization is challenged in court, think carefully about whether to intervene in support of the agency’s interpretation. Sitting on your hands now could prove problematic later if the agency switches course.

Number 4: Do reassess your approach to comment letters, focusing on the best interpretation of the statute.

Comment letters can no longer rely on policy arguments to drive statutory interpretation. Agencies will now need to assess the best interpretation and adopt that approach or adopt the one that best serves their policy goals from the range of possible court outcomes.

That means agencies—and, in turn, commenters—must pay closer attention to things like dictionary definitions, plain meaning, canons of interpretation, statutory structure, and (in some courts) legislative intent. Comment letters that raise these kinds of arguments will be more useful to agencies and more advantageous in future litigation.

Number 5: Do think creatively about your approach to administrative procedure litigation—including the long game.

Think critically and creatively about other frontiers in administrative litigation. For example, the major questions doctrine and non-delegation doctrine could warrant more space in briefs now that Chevron is gone. Under the major questions doctrine , agencies can only regulate issues of “vast economic and political significance” if Congress clearly and explicitly delegated that power. And four justices have already signaled their support for a stronger version of the non-delegation doctrine, which governs when Congress can delegate power to the other branches.

Litigants should look for ways to further push the already “fuzzy” line between legislative rules (which are subject to notice-and-comment) and interpretive rules (which are not). Chevron incentivized agencies to use notice-and-comment procedures because only notice-and-comment rules were generally eligible for deference.

Without deference, agencies will likely look more to less-formal processes with increasing frequency. Consider arguing that the agency’s supposed “interpretive” rule is actually legislative and impermissibly skipped the notice-and-comment process.

Finally, lawyers should think carefully about where to file suit, and be prepared for the possibility of circuit splits and the need for Supreme Court review. Although the US District Court for the District of D.C. is often still the best bet for district-court APA litigation, it’s worth looking beyond the capital for circuits that may be receptive to your arguments.

And with more cases being filed in more circuits challenging the same rules, the long game—setting up and pursuing splits to the Supreme Court, if necessary—will become more important than ever.

The cases are Loper Bright Enterprises v. Raimondo , No. 22-451, and Relentless v. Department of Commerce, No. 22-1219, decided 6/28/24.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Sean Marotta is partner at Hogan Lovells and has argued at the Supreme Court and in state and federal courts across the country.

Danielle Desaulniers Stempel is a senior associate in Hogan Lovells’ Supreme Court and Appellate practice group, where she regularly litigates administrative-procedure cases.

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To contact the editors responsible for this story: Jessie Kokrda Kamens at [email protected] ; Alison Lake at [email protected]

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SME definition

Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the EU. The definition of an SME is important for access to finance and EU support programmes targeted specifically at these enterprises.

What is an SME?

Small and medium-sized enterprises (SMEs) are defined in the EU recommendation 2003/361 .

The main factors determining whether an enterprise is an SME are

• staff headcount
• either turnover or balance sheet total

These ceilings apply to the figures for individual firms only. A firm that is part of a larger group may need to include staff headcount/turnover/balance sheet data from that group too.

Further details include

• The revised user guide to the SME definition (2020) (2 MB, available in all EU languages)
• Declaring your enterprise to be an SME (the form is available in all languages as an annex in the revised user guide)
• The SME self-assessment tool which you can use to determine whether your organisation qualifies as a small and medium-sized enterprise

What help can SMEs get?

There are 2 broad types of potential benefit for an enterprise if it meets the criteria

• eligibility for support under many EU business-support programmes targeted specifically at SMEs: research funding, competitiveness and innovation funding and similar national support programmes that could otherwise be banned as unfair government support ('state aid' – see block exemption regulation )
• fewer requirements or reduced fees for EU administrative compliance

Monitoring of the implementation of the SME definition

The Commission monitors the implementation of the SME definition and reviews it in irregular intervals. Pursuant to the latest evaluation, the Commission concluded that there is no need for a revision.

On 25 October 2021, we informed stakeholders by holding a webinar with presentations on the SME evaluation's results and next steps.

Supporting documents

• Study to map, measure and portray the EU mid-cap landscape (2022)
• Staff working document on the evaluation of the SME definition  (2021)
• Executive summary on the evaluation of the SME definition  (2021)
• Q&A on the evaluation of the SME definition  (2021)
• Final report on evaluation of the SME definition  (2018) (10 MB)
• Final report on evaluation of the SME definition (2012)  (1.8 MB)
• Executive summary on evaluation of the SME definition (2012)  (345 kB)
• Implementing the SME definition (2009)  (50 kB)
• Implementing the SME definition (2006)  (40 kB)

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