“Succession Planning” is a term that is being used a lot in today’s business world. It refers to the process of exploring your options so that you can protect the value of your hard-earned business investment and choose the right exit strategy that makes sense for you, your business, and your family. This process takes thought, planning and time to arrange and implement.


Who should you include in your Succession Planning?

Statistics show that most business owners have not given succession planning much thought. Current demographics indicate that many baby boomers are soon looking to retire so succession planning should be at the forefront of a lot of business owners’ minds. Planning is crucial to ensuring you receive the most value for your business and to minimize the taxes paid on the future sale. This process takes at least two to three years to plan properly and should involve a strong team of professionals to ensure that you get proper advice.  This team should include your Chartered Professional Accountant, business valuator, lawyer and investment advisor.

When should you Start Succession Planning?

Ideally the succession planning process takes place over three to five years and part of this process is to ensure that your business is worth as much as possible when you decide to sell. (Refer to my previous article “Build value before you sell” to understand key things that a buyer will be looking for). It is a great idea to consider having a business valuation prepared by a qualified business valuator to gain a realistic estimate of the business’ current value. This process will also identify key value drivers that would increase the value if improved before the sale. Knowing what to focus on allows you to work on improving the areas identified so that you can maximize the sale price you will get when you eventually sell.

Tax Planning Tips that can help you Optimize your Value

A key component of getting the most money in your pocket at the end of the day is tax planning. It is essential to understand that buyers typically want to buy assets to be able to have the full value of the assets to depreciate over time (tax deduction) and to avoid taking on the liability associated with previous business operations. Sellers want to sell shares to benefit from the Lifetime Capital Gains Exemption, which results in approximately $860,000 of the capital gains on qualifying shares being exempt from tax. If goodwill is a large part of the price, then the asset vs. share sale may yield comparable after-tax results – have your accountant run the numbers.

To qualify for the Lifetime Capital Gains Exemption, it may require the company to move assets that will not be part of the sale (real estate, surplus cash, investment portfolio, etc.) or are of no use to a buyer (redundant equipment). There are potential tax planning opportunities, such as a corporate reorganization to move assets to a holding company. Your Chartered Professional Accountant can help you make sure that your corporate structure is ready for a tax-efficient sale as well as help you structure the sale transaction to minimize the tax on the sale of the business. It is important to remember that every situation is unique and there is no cookie-cutter solution to the succession planning process.


If you are starting to think about retirement and selling your business, it is never too early to start the conversation with your McCay Duff Advisor.

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   Business Valuation, Retirement Planning, Succession Planning, Tax Planning
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