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Thread: Spin Off

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    Default Spin Off

    What is the best way to spin off a business from an existing corporation?

    I have a DBA which I want to spin off and give 51% to my partner. What is the best way to do this? I'd prefer to do it myself if possible as we are a very small business, may 50K a year in revenues. By spinning it off and making her 51% owner, we will be able to register the business as an MWBE. Although a partner in name only for the past three years, I will need to find a way to give her the controlling interest in the spun off corporation.

    If this is not something recommended done on one's own, what sort of professional would be the best choice?

    Thanks!
    Dan

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    Sorry no one has answered your question yet Dan. I'm afraid I don't have a good answer for you either, but I wanted to respond to help keep your thread active and hopefully bring it to the attention of someone who can supply an answer.

    How does the business currently work in terms of ownership? Are you and your partner equal owners right now? Could you rewrite your agreement to change the ownership percentages? I don't know off hand, but I would think the IRS has a form to do just that. Is there a reason you specifically want to spin off the company?

    Sorry I can't help more, but hopefully someone who can will see this.
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    Quote Originally Posted by vangogh View Post
    Sorry no one has answered your question yet Dan. I'm afraid I don't have a good answer for you either, but I wanted to respond to help keep your thread active and hopefully bring it to the attention of someone who can supply an answer.

    How does the business currently work in terms of ownership? Are you and your partner equal owners right now? Could you rewrite your agreement to change the ownership percentages? I don't know off hand, but I would think the IRS has a form to do just that. Is there a reason you specifically want to spin off the company?

    Sorry I can't help more, but hopefully someone who can will see this.
    Its currently a c corp that has a number of small sidelines. She is my partner in name only, and we want to continue or primary business together but seperate from the main enterprise. In addition, I want her to own 51% of the new entity since it will be easier to get contracts that way.

    Thanks
    Dan

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    Spinoffs in larger corporations can be a little complicated. Transferring assets, customer base, inventory etc. In your case, if it is as small as you indicate, it may be relatively easy. You might form a new corporation and let the new entity “buy” the subsidiary business of the original. If it is just the “name” and customer list and even some assets it shouldn’t be too complicated. However, if it involves significant inventory or transferring incomplete long term contracts or significant liabilities you probably need an attorney and/or accountant.

    There are a number of ways to go but without knowing the nature of the business or what would be involved it is hard to say.
    What is the business being “spun-off”? What actually would need to be transferred?

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