Succession Planning For Your Business
The Financial Post November 2018 published this informative article https://business.financialpost.com/entrepreneur/small-business/baby-boomer-retirements-will-cause-a-huge-wave-of-business-transfers-cfib
With Canada’s aging population, there are a large number of business owners who will want to sell their businesses or retire over the next decade. Many of these business owners haven’t put together a plan that details how they are going to exit their businesses. This is especially important, as many of them are planning on the sale of their business to finance their retirement.
It is recommended that someone thinking about selling or exiting their business should begin the planning process three to five years prior to leaving. This gives them time to fix any issues they have in the business, and train people so that someone has the knowledge to take over. Many business sales are more successful if the previous owner stays for a period of time, so the new owner is confident in their role and the customers have been introduced to the new owner.
Lifetime capital gains
One of the other major considerations for many business owners is the lifetime capital gains exemption. If you are selling shares in a privately owned Canadian corporation, you may be able to sell it tax free (up to a certain value). In order to take advantage of this, there are ratios that have to be met for 24 months prior to the sale, so planning is necessary to ensure one can take advantage of this tax break.
For the present, business owners should also have a contingency plan in place in case they are not able to work for a time due to injury or illness.
Working with your accountant as part of your planning team can help with tax planning and other considerations around the success of your future retirement or business sale.