The process of transferring assets from one corporation to another is a rather tricky one. If it’s done incorrectly it can have severe tax and legal consequences.
Transferring business assets
The reasons behind making a transfer should also be treated with caution.
For example, if the company you’re transferring these assets away from is facing dissolution or insolvency, a transfer of assets could be perceived as an attempt to obstruct a creditor’s claims process.
When done correctly, the asset transfer process should ensure that each corporation is treated as a separate legal entity, with separate assets and separate accounting. This is essential, as it ensures that the assets and liabilities of both corporations aren’t treated as being the same. If this were to happen, you risk any limited liability created from having 2 separate entities, and potentially make it more difficult to sell one or both of the corporations in the future.
One of the best ways to transfer assets, without having all of the assets and liabilities moved from one corporation to another, is to sell them from the first corporation to the second at a fair market price. This can be complicated, however, and it’s essential that it’s done correctly.
There are specifics involved, so it is advised that you speak with your accountant and business lawyer before undertaking such a sale, or indeed before considering any other method of asset transfer.