Financial Freeway - Succession Planning

Tax planning is an integral part of a business succession plan. Tax planning not only involves minimizing personal, business, and estate taxes, but it also involves personal

Many business owners are mothers and fathers who want their children to have the same success as they had with the business. However, if your children do not have the suitable skills or desire to continue the business, it may be a smart move to look outside the family for new owners and managers of your business, even though it is quite tempting to encourage your child to do it.

If you are confident enough that your children can take over the business be sure that the timing is right. It is important for your children to be well along in their learning curve when the transition occurs. This becomes a little tricky at times, but the smoothest succession plans occur when the children already have broad work experience that can catapult them into managing your business without significant risk to the business.

You may not be sure if family succession is the right path for you to take with your business. This is why we are here to help you solve any problems and offer objective advice on the possibility of a family succession plan for your business.

Your Business and Retirement

If you are a business owner approaching your retirement, chances are you have been asking yourself if you will have enough money to last you throughout your retirement years. A proper business succession plan addresses the issue of retirement and outlines what will work best for you. If you plan on using your business for a major retirement income source besides your pension, then addressing retirement issues well in advance of your departure from the business is essential - this will ensure that you have the retirement income and security needed in your post-business years.

Your Business and Taxes

Your Business and Unforeseen Events

A complete succession plan will not only include all of life’s foreseeable events, but it will take into account any events that were not anticipated.

Firstly, protection in the event of a disability or premature death is of utmost importance. Ordinary life, disability and/or critical illness insurance is a great start to your protection plan, but several other things should be looked after as well. Be sure to have a buy-sell agreement in place so that transferring ownership runs smoothly. As well, your will, living will, and powers of attorney should be coordinated with your buy-sell agreement. Most importantly, your successor should have the appropriate amount of funds to deal with your disability or death and the loss of profit that may occur in your absence.

In the event a martial breakdown occurs, a proper protection plan should be put in place to deal with the property that must be divided and other assets that will be split. Through the creation of buy-sell agreements, marital contracts, trusts, and the proper structuring of ownership interests you can be assured that your business will be

The Buy-Sell Agreement

The buy-sell agreement is created to protect both the owners and the business in case of an unforeseen event. This agreement provides certainty of ownership in difficult situations such as retirement, death, or disability of the owner, a non-resolvable dispute between owners, marital breakdown, personal insolvency of an owner and any illegal actions by an owner.

Shareholder tax exemptions, deferring tax liabilities, reducing probate fees, and structuring the estate to minimize the tax liability. Starting a business succession plan early and implementing strategies to minimize taxes are essential to the successful transition of a business in the future.

Concepts of Business Succession Planning