Succession Planning

Succession Planning

If you decide to transfer your business to family members, friends, or other parties, the financial implications will depend on your business structure and the method you choose to transfer your ownership.

The common ways to transfer ownership of a company to family members include:

• Through joint ownership, either using a share transfer (if the business is incorporated) or using a partnership (if the business is an unlimited company)
• Through a sale, wherein your heirs would purchase the business outright, or over a period of time
• Through your will or living trust
• Through gifting, wherein you would give parts of your business to your heirs gradually over several years

Due to the complexities of succession, we recommend that you draft a formal succession plan for a smooth transition, and that you retain the services of a lawyer and an accountant to help you sort through the legal and tax implications. Refer to our Operations Management-Exiting section for guidance.

Closing Your Business

You might need to shut down your business permanently—even if you don’t want to—due to extenuating circumstances, such as a personal or family crisis, health issues, faltering revenues, or bankruptcy.

In this case, the dissolution of your business might result in financial hardship. Refer to our Operations Management-Exiting section for information on what you might expect in this situation and some possible mitigation strategies.

When bankruptcy is your only option, it might feel like failure, but it can also provide relief. When you’re in bankruptcy, your financial obligations can diminish because no unsecured creditor can garnishee your wages or initiate any other collection action against you.

However, you will be required to pay:

• Any outstanding taxes and payroll remittances to Canada Revenue Agency
• Any wages or salaries owed to your employees
• Any secured debt. Your secured creditors can repossess any property or collateral you had secured against a loan, such as your car or house.