Handing over a business: the legal form sets the course

More businesses are changing hands in Austria than ever before. The Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKÖ) counts 8,202 business takeovers for 2025 – 5.3 per cent more than the year before and the highest figure since the survey began in 1998. In 2024, with 7,792 businesses successfully handed over, the count had already been 4.9 per cent above the previous year. According to the WKÖ, around 705,000 jobs are tied to the businesses awaiting handover. At present around 55 per cent of handovers still take place within the family, with a downward trend – so more and more often, someone from outside takes over.

The WKÖ links the figures to two demands: a participation allowance of up to 100,000 euros, deductible over five years, to encourage private investment in business takeovers, and a "Taskforce Betriebsnachfolge" (business succession task force) modelled on the Startup Council.

Whether these demands become law is open. What applies today, by contrast, is readily identifiable – and it turns first on a question many transferors do not even perceive as a legal one: in what legal form is the business run? Sole proprietorship, partnership and GmbH follow three different sets of rules, with different formal requirements, time limits and liability consequences.

Sole proprietorship: the contracts go with the business – but any contractual partner can object

Anyone who acquires a sole proprietorship (Einzelunternehmen) and carries it on takes over, under § 38 UGB, the transferor's business-related legal relationships – supply contracts, purchasing contracts, ongoing continuing obligations. That sounds like an automatic mechanism, but it has a fault line: each contractual partner may object to the takeover of its contractual relationship within three months of being notified. The notification must draw attention to this right of objection. If the partner objects effectively, its contract continues with the previous owner – and the acquirer is left without it.

For practice this means: the notifications to the contractual partners are not a formality, but the moment at which it becomes apparent whether the business passes as a whole. For contracts on which the value of the business depends – key suppliers, major customers, leases – consent should be obtained before signing, not merely hoped for after the effective date.

The second fault line is liability: for obligations that arose before the transfer, the acquirer who carries on the business is liable alongside the previous owner. An exclusion of liability can be agreed, but it is effective against third parties only if it is made public at the time of the transfer – by entry in the commercial register (Firmenbuch), by announcement in a manner customary in business, or by notice to the third party (§ 38 Abs. 4 UGB). A clause that appears only in the handover agreement does not protect the acquirer externally.

OG and KG: yesterday's partnership agreement decides tomorrow's handover

In a general partnership (offene Gesellschaft, OG) or limited partnership (Kommanditgesellschaft, KG) it is not a business that is transferred, but a partner's position. The entry of a new partner requires, in principle, the consent of all existing partners – anyone wishing to install a successor therefore needs their co-partners, or a partnership agreement that already provides for the change.

That is precisely where the most common mistake lies: the partnership agreement dates from the founding years and does not contemplate the succession case. Two types of clause must be distinguished. The simple continuation clause provides that the partnership is carried on with the remaining partners – the departing share accrues to the others, and the intended successor stays outside. The qualified succession clause lets a specific successor step into the partner's position. Anyone planning a succession within or outside the family therefore checks the partnership agreement first – and amends it while everyone involved is still at the table.

For the departing partner, continuing liability also counts: for obligations established up to their departure they remain liable insofar as those obligations fall due within five years (§ 160 UGB). The period begins with the entry of the departure in the commercial register – so postponing the filing extends one's own liability.

GmbH: no share transfer without a notarial deed

With a GmbH it is not the business that changes owner, but the share (Geschäftsanteil) that changes shareholder. The transfer is valid only by way of a notarial deed (Notariatsakt) (§ 76 Abs. 2 GmbHG) – a private written agreement is not enough, an oral one even less so. On top of that, the articles of association frequently contain a Vinkulierung: a requirement that the company or the co-shareholders consent to the transfer, often combined with a right of pre-emption. Here too: read the articles of association first, then negotiate.

Commercially, with a GmbH the fundamental choice lies between two routes. In a share deal the successor acquires the shares; the company continues to exist and remains the bearer of all contracts, obligations and employment relationships. The acquirer's liability as shareholder remains limited to the capital contribution – in return, they take over the company with everything in it, including what they do not know about. In an asset deal the successor acquires individual assets from the company's business; § 38 UGB then applies again, with the co-liability for old obligations described above. Which variant fits is a question of risk allocation – and of careful examination before the purchase.

A note for sole proprietors who want to hand over in shares: under the conditions of Art. III UmgrStG, a business can be contributed to a newly founded or existing GmbH at book values and thus without uncovering hidden reserves. This is an arrangement that needs lead time and must be planned with a tax adviser from the outset – but it later opens up exactly the forms of handover that are closed to the sole proprietorship.

The employees transfer automatically – and must not be dismissed because of it

In a share deal nothing changes legally for the workforce: the employer was and remains the company. If, however, the business itself passes to a new owner – as in the sale of a sole proprietorship or in an asset deal – § 3 AVRAG applies: all existing employment relationships pass to the acquirer by operation of law. What matters is that the economic unit is carried on with its identity preserved; the contractual construction is irrelevant.

The transfer itself is no ground for dismissal: the AVRAG does not say so expressly; under the settled case law of the Austrian Supreme Court of Justice (OGH), a dismissal declared solely because of the transfer of the business is nevertheless ineffective (RIS-Justiz RS0102122). Conversely, employees may object to the transfer of their employment relationship in two cases: if the acquirer does not take over the protection against dismissal under the collective agreement or the company pension commitments (§ 3 Abs. 4 AVRAG). The collective agreement and works agreements initially continue to apply after the transfer (§ 4 AVRAG, §§ 31, 32 ArbVG). If there is no works council, the affected employees must be informed before the transfer of its date, reason, consequences and planned measures (§ 3a AVRAG); if there is one, it must be informed under the Labour Constitution Act (Arbeitsverfassungsgesetz).

For claims established before the transfer, the transferor and the acquirer are liable zur ungeteilten Hand – jointly and severally, each answering for the whole; the acquirer's liability is capped at the value of the assets taken over (§ 6 AVRAG, § 1409 ABGB). The acquirer steps into outstanding holiday entitlements, prior service periods and accrued severance pay (Abfertigung) expectancies – an inventory of the employment relationships before signing is therefore not a formality, but part of determining the purchase price.

The tax side: reliefs with conditions attached and a notification duty

For the transferring side, the Income Tax Act knows three instruments that can relieve the gain on sale or cessation: a tax-free allowance of 7,300 euros (§ 24 Abs. 4 EStG), the even spreading of the gain over three years to smooth the progression (§ 37 Abs. 2 EStG), and the Hälftesteuersatz – a rate of half the average income tax rate (§ 37 Abs. 1 and 5 EStG). None of them applies of its own accord, and they are mutually exclusive: the allowance is not available if the spreading or the Hälftesteuersatz is claimed. Spreading and Hälftesteuersatz each require an application and are available only if seven years have passed since the business was opened or last acquired for consideration. The Hälftesteuersatz additionally requires that the sale or cessation rests on one of the three grounds named in the statute: death, incapacity to work, or completion of the 60th year of life combined with the cessation of gainful activity. Which instrument comes into consideration in the specific case, and how the purchase price is to be apportioned for it, must be worked through with a tax adviser before signing – little can be changed afterwards.

If real property forms part of the business assets, real estate transfer tax is added. For gratuitous acquisitions – handovers within the family are deemed gratuitous by law (§ 7 Abs. 1 Z 1 lit. c GrEStG) – the graduated rate applies: 0.5 per cent for the first 250,000 euros of the property value, 2 per cent for the next 150,000 euros, 3.5 per cent above that; for partly gratuitous acquisitions this applies to the gratuitous part (§ 7 Abs. 1 Z 2 GrEStG). For business handovers the statute knows two further reliefs, both tied to conditions. The allowance of 900,000 euros, together with a cap on the tax of 0.5 per cent of the property value, requires among other things that a natural person acquires gratuitously or partly gratuitously and that, in a handover inter vivos, the transferor has completed their 55th year of life or is incapable of working (§ 3 Abs. 1 Z 2, § 7 Abs. 1 Z 2 lit. b GrEStG). Under § 5a NeuFöG, in addition, real estate transfer tax is not levied insofar as the value decisive for calculating the tax does not exceed 75,000 euros. This relief, however, turns on the person taking over: whoever controls the business within two years of the transfer must not previously have been active in a controlling capacity in a comparable business (§ 5a Abs. 1 Z 2 NeuFöG). Anyone already running a business of the same kind is thus excluded – in successions within one sector the most common reason why the relief does not apply after all. If this condition is not met, or if the business is transferred on, put to purposes outside the business or given up within five years, the relief lapses retroactively; the owner of the business must notify all authorities concerned of the lapse of their own accord and without delay (§ 5a Abs. 2 Z 3 NeuFöG). In any event it is not granted automatically: it requires, among other things, the declaration on the official form (NeuFö 3) after prior advice from the statutory professional representation, and the form must be before the authority when the relief is claimed – submitting it later does not cure the defect according to the case law of the Supreme Administrative Court (VwGH 12.11.2019, Ra 2019/16/0153). Whether the conditions are met in the individual case is likewise something to be clarified with a tax adviser in advance.

One duty remains even with a gratuitous handover: since 1 August 2008 there has been no gift tax, but there is the notification duty under § 121a BAO. Gratuitous transfers of business assets must be reported within three months if they exceed the thresholds – 50,000 euros between relatives within one year, 15,000 euros between other persons within five years. An omitted notification is no trifle: anyone who deliberately fails to make it commits a Finanzordnungswidrigkeit (a fiscal administrative offence); the fine can amount to up to 10 per cent of the fair value of the assets transferred (§ 49a FinStrG).

Several years of lead time, not several weeks

An orderly handover takes time. As a rule of thumb, several years of lead time are recommended – rather more for succession within the family, because there, alongside contract and tax, the succession on death, the siblings who step aside and the financial security of the transferor generation must also be thought through. Anyone without a successor in the family or in the business will find in the Economic Chamber's succession exchange (nachfolgeboerse.at) a platform that brings transferors and prospective buyers together. On the financing side, grants and guarantees from Austria Wirtschaftsservice (aws) can ease the takeover; which instruments are open in the individual case should be clarified before the bank's financing commitment.

What belongs in the handover agreement

Regardless of the legal form, experience shows that it is the same points over which disputes arise after the handover – so they should be settled beforehand:

• a clear definition of what passes: the business as a whole, individual assets or company shares – and as of what effective date
• the old obligations: who bears them as between the parties, and whether an exclusion of liability under § 38 Abs. 4 UGB is entered in the commercial register and made public
• the notifications to the contractual partners, including notice of the right of objection – and a provision for the case that a key contract does not come along
• for OG and KG: the check against the partnership agreement, the necessary consents and the prompt entry in the commercial register, which starts the five-year period of continuing liability
• for the GmbH: notarial deed, consents where a Vinkulierung applies, and warranties as to the condition of the company
• the inventory of the employment relationships, the information of the employees before the transfer and recourse for old claims, for which both sides are liable jointly and severally
• purchase price, payment terms, security – and the apportionment of the purchase price, agreed with the tax adviser
• for real property: the NeuFö 3 declaration, including the prior advice from the professional representation, before it is filed – and, in advance, the question of whether the party taking over meets the condition of § 5a Abs. 1 Z 2 NeuFöG
• for a gratuitous handover: who makes the gift notification, and that the three-month deadline is in the diary
• a non-compete arrangement for the transferring side, limited in subject matter, time and territory
• the transferor's cooperation after the effective date: training, introductions to customers and suppliers, availability for a transitional period

The last point is the one most often forgotten and most painfully missed. A business does not consist only of contracts and balance-sheet items, but of relationships – and those pass only if the handover gives them time.