Legal Question in Business Law in California

finding lawyer is the best place to start. A competent business attorney will help you navigate the process, the first part of which is to know the value and assets of the business. There are multiple ways to get this done, each with advantages and disadvantages, and you want to be smart about it.

First, you didn't mention how the business is organized. If it opened 40 years ago, it probably isn't an LLC, but beyond that, is it a proprietorship or corporation? The process for transferring ownership would be a sale (or gift) of stock if it's a corporation. That's fairly straightforward. If the business is a proprietorship, transfer of ownership would require a sale or other transfer of all its assets and liabilities, generally by an itemized bill of sale, but there can be messy details and complications. For one example, if your father has a long-term lease of business premises in his name, some negotiations with the landlord may be needed to obtain permission to assign the lease to you.

Next, keep in mind that transfer of management responsibility and transfer of ownership are separate concepts. You could buy the company and he would continue operating it, or vice-versa. Under the vice-versa concept, your father could retire, you'd step in as president or general manager or whatever and run it, but your father would continue to own the business. There is perhaps reason to prefer this kind of arrangement, because (a) it avoids a gift and the associated tax issues, or it avoids your having to come up with and pay a fair price, in the alternative. Second, if you inherit the business (ownership, I mean), you'll get a step-up in tax basis, giving you (perhaps) a lower taxable gain if you ever sell part or all of it.

If the business has been using a CPA, your father and you should confer about succession planning. If not, or as a second step in succession planning, the two of you should see an attorney who specializes in estate planning, business succession, and/or living trusts.