Planning For Succession – Canadian Taxation

TaxConnections Blogger Larry Stolberg posts succession planning ideasPlanning For Succession (1)

Asset/creditor protection and the valuation of your business requires on-going attention.

By being proactive, say 5-7 years out, you are in a great position to minimize risk and maximize the value of your business.

The First Step

♦ If something happened to you today

• who would run the business?

• what income would you need?

♦ Valuation-how much do you think the business is worth if sold to an:

• outside buyer

• family member

♦ Do you have a Will, power of attorney, shareholders agreement?

♦ Do you have a strategic plan?

♦ Who are the stakeholders in your business?

• family members

• key employees

Family Participation Plan

♦ Criteria for family to enter the business

• age,

• experience

• education

• compensation

♦ Who will have voting control of the company and for what period?

♦ Training and supervision, mentor

♦ Retirement

♦ Marital issues, protection, transfer of ownership

Management Buy-Out

♦ Qualifications of key employees

♦ Do they get along with other stakeholders?

♦ Are they present for the long-term?

♦ Can they afford the purchase?

♦ Are they insurable?

♦ Do they have good leadership?

♦ Are they free of baggage?

Improving The Value of Your Business

♦ Focus on growth prior to the sale

♦ Evaluate discretionary expenses

♦ Assess company performance to others in the industry

♦ Document business decisions and operational systems to make transition easier for the purchaser

♦ Remove non-operating assets at least 2 years prior

♦ Purification, deal with tax issues

♦ Debt restructuring

♦ Restructuring shareholdings to maximize after-tax cash flow from sale

♦ Transition team in place

Footnote:  Reference to CICA publication on Succession Planning

In accordance with Circular 230 Disclosure

Larry Stolberg, CPA, CA, CPA (South Carolina), has been practicing as a full-time tax specialist for over 30 years, in the Toronto, Ontario Canada and surrounding GTA area with primary emphasis on:

•Corporate restructuring for business owners
•Estate/succession planning
•U.S. expatriate and cross border issues
•Tax efficient planning that will achieve both your short and long term objectives

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