1- Family business

Sound tax and financial planning allows individuals to accumulate and grow wealth, thereby making it possible for them to meet their spending objectives during their working and retirement years. The preservation and eventual transfer of family assets are becoming a major concern. Estate planning aims to minimize the income tax consequences of meeting these objectives.

Entrepreneurs may spend more than 80,000 hours building their businesses, but only ten hours looking after their estate plans.

Estate planning is no picnic. Juggling financial interests and family interests and, in many cases, attempting to reconcile conflicts that may occur between the two, can often produce emotions that make an initial foray into the area difficult. Once the process is underway, the taxpayer should take the necessary time to plan the entire operation in a way that makes it possible to retain control of the process and achieve objectives.

Individuals who leave property at the time of their death want their estates to be transferred in accordance with their wishes, while paying as little income tax as possible. Therefore, planning has to be done during
the person’s lifetime.

Accordingly, the estate planning process should be undertaken as soon as possible in order to maximize the tax planning possibilities. The main steps in the process include:

• Financial planning;
• Power of attorney in the event of incapacity;
• Will;
• Life insurance;
• Estate freeze;
• Shareholders’ agreement, if any;
• Business succession;
• Planned charitable donations.

Tax reasons may motivate some taxpayers to consider transferring all or part of their property during their lifetime, particularly shares of private corporations, which passes on this wealth to future generations.

The family business brings together a number of players, including shareholders, family members and employees. Over time, each player’s influence and interest becomes clear. In spite of disagreements and other problems that may arise, there is generally a common desire for the business to succeed.

Succession Planning

The survival of a business will depend on the development and implementation of a succession plan. The manager of a family business who thinks about his or her succession plan will have to consider a number of issues:

• Continuation of the business;
• Development of children’s talents;
• Preparation of succession;
• Choice of successor;
• Transfer of ownership, leadership and control of the business;
• Adequate retirement income;
• Protection of family patrimony; and
• Reduction of income taxes.

Raymond Chabot Grant Thornton has developed an integrated approach to business transfers, based on the business owner’s situation, that takes into consideration the human, strategic, financial and tax aspects of the business transfer process. Learn more from your consultant.

Owners who determine their objectives in advance and start the process for transferring their business early on have a better chance of succeeding. Owners have to plan when they will retire, their financial requirements during retirement and how the family business will contribute to those requirements.

Business succession planning should take place several years before the business owner retires.