Can I gift part of the business to my kids and sell them the rest?

Yes, structuring a transition as part gift and part sale is a common and legitimate approach, and it can make a business more affordable for a child who couldn't otherwise finance a full purchase. Each portion needs to be documented and treated correctly on its own terms, though. The gifted portion is a transfer for no consideration, with its own tax consequences to work through, since gifting shares or assets can still trigger tax on the value transferred; the sold portion needs a proper purchase agreement, valuation, and payment terms like any other sale.

Blending the two without being clear about which shares or assets fall into which category tends to create confusion later, both for tax purposes and for understanding exactly what was transferred and on what terms. This kind of mixed structure benefits from coordinated tax and legal advice up front, since the gift and sale components interact and the overall structure should be planned together rather than layered on as an afterthought.