Plan for the future of your small business

You should put a succession plan in place that ensures your hopes for your business are realized

It is your small business and you’ve worked hard to make it a success.

But one day it won’t be yours.

You’ll decide to step back and hand over day-to-day responsibilities to someone else, or a medical event may make the decision for you. That’s why you should put a succession plan in place that ensures your hopes for your business – like funding a comfortable retirement or leaving a legacy for your family – are realized.

Here are some essential planning items to consider:

• Sell it?

At some point, sell your business to the highest bidder. Or if you have co-owners, partners or other shareholders, have them buy you out.

Be sure you have a buy-sell agreement in place. Speak to your lawyer about putting one in place before you are in a position that you want to sell your business.

Alternatively, you could offer ownership to certain key employees. The most difficult task may be setting a value on your business.

• Keep it in the family?

You’ll have to decide how to finance the transfer. The new owner could purchase an interest in the business but at what value?

You might plan on leaving shares to a person, like one of your children, but have you considered if there are enough other assets in your estate for other children? Do you need to increase your insurance coverage to provide that inheritance?

• Wind it down?

If your knowledge and expertise is the biggest asset in your business, you may not be able to sell it unless your client list has some value.

There are many different aspects to deal with when winding down a business, such as disposing of remaining inventory, giving notice to landlords, creditors and customers and, if your business is incorporated, deciding whether to keep the corporation going for tax purposes or winding it up.

• Other things to consider:

Assessing the tax liabilities of the sale to you, your family or estate; ensuring the growth on your business receives the most favourable tax treatment; considering capping the tax liability on your business through an estate freeze by transferring ownership and future growth of capital assets, usually to your children, now rather than after your death; or placing the business in a family trust that becomes a separate taxable entity and is not included in your estate.

When making your succession plan for your business you should consult a lawyer to deal with the legal aspects.

It’s hard to imagine your business without you — but you need to plan for that day now and your legal and tax advisers and professional adviser have the knowledge and perspective to help you make the right decisions for your business and every other aspect of your financial life.

J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.

Just Posted

UPDATE: Motorcyclist dead following crash on Strathcona Parkway

A 29 year old man has died following a motorcycle crash on… Continue reading

Sarah Rebitt named the Vanier recipient of the Governor General’s Award

Sarah Rebitt was named the recipient of the 2018 Governor General’s Award… Continue reading

Vancouver Island pharmacist suspended for giving drugs with human placenta

RCMP had samples of the seized substances tested by Health Canada

Bylaw rescinded after vacation rental owners express concerns

Concerns included a lack of consultation

Get ready for a week of sunshine across Vancouver Island

Environment Canada is forecasting temperatures in the high teens all this week

AFN national chief suggests moving Trans Mountain pipeline route

Perry Bellegarde said many Indigenous communities believe in the need to diversify export markets

Bob Castle’s Under The Glacier cartoon for Sept. 25, 2018

Bob Castle’s Under The Glacier cartoon for Sept. 25, 2018… Continue reading

B.C. making progress on senior care staffing, Adrian Dix says

Minister aims to meet residential care provincial standard by 2021

B.C. realtor receives racist letter touching on ‘empty homes’

The letter has been met with condemnation of the racism after Winnie Wu posted it online

WATCH: Rare close encounter with whale pod

Pod of southern resident orca whales breach within arms length of whale watchers

Pawsitive response by B.C. community for 60-plus surrendered cats

Community comes together to help surrendered cats at Penticton SPCA

Judge weighs Cosby’s sentence after declaring him ‘predator’

Montgomery County Judge Steven O’Neill made the decision as he weighed the punishment for Cosby

AFN national chief suggests moving Trans Mountain pipeline route

Perry Bellegarde said many Indigenous communities believe in the need to diversify export markets

U.S. worker charged after video shows him spitting on customer’s pizza

Jaylon Kerley of Detroit is charged with a felony count of food law violations

Most Read