My Finances

First posted: September 21, 2010

According to the Canadian Federation of Independent Business, business owners put approximately 80,000 hours into building their companies, but only six to ten hours into planning when it's time to hand it over to another party. If it's clear that a family business will survive its founder and has promising potential for growth, and there is someone interested in taking it over, it's really worthwhile to define a strategy to facilitate the transfer of this valuable heritage. Under such circumstances, personal considerations may also come into play, such as the health of the founder or founders and the desire to be fair to all inheritors.

Before proceeding, here are some things to think about to help you make well-informed decisions:

1. Are the potential new owners already participating in the growth of the business?

2. When is the best time to transfer the future value of the business (also referred to as estate freezing), which can help you take advantage of the $750,000 tax exemption for qualified small business corporation shares?

3. Does the current owner wish to retain a certain amount of control over the business being transferred? If so, how much and in what way?

4. If some members of the family work within the business while others have no interest in keeping it going, what would be the fairest way to divide its future value between them?

5. What form of compensation would best suit the current owner (salary, dividends, etc.)?

6. Would the creation of a trust for the inheritors provide more flexibility in dividing up shares in the future?

7. In terms of estate freezing, to what extent is income splitting a good option in order to transfer the taxation of certain income to the inheritors?

The answers to these questions vary, depending on the type of business, its financial situation, the industry, the business model, the current owner's relationship with the future owner or owners, and the financial objectives of each party.

For more information about the sale, purchase or transfer of a business, visit the Desjardins website, consult with a financial planner¹, or visit the Desjardins Business Centre nearest you.

1). Within Desjardins caisses, the financial planner acts on behalf of Desjardins Financial Services Firm Inc.