Business succession planning requires the business owner to consider what will happen when he or she decides to retire, and to consider this and implement a plan well in advance of the retirement date. While in some instances the business may be sold or wound up, in many cases our business client is seeking a plan that will see the business carried on by the next generation; whether employees, family or otherwise.
After considering our client’s business values, goals, retirement desires and business and family circumstances, we will work together with our client’s financial, accounting and tax advisors to develop a business succession plan for our client that addresses four main issues; retirement, management, ownership and taxes.
Retirement planning may involve the implementation of an EPSP (Employment Profit Sharing Plan) or an IPP (Individual Pension Plan), the implementation of employment contract or consulting agreement for the business owner as well as the implementation of a buy-out of the business over a period of time.
Consideration of management and ownership issues are key factors. We assist our client to consider the transfer of management of the business and the transfer of ownership, and to consider whether these two transfers will coincide. In some family succession scenarios, the transfer of management of the business may be limited to the children who are active in the business while the transfer of ownership will be to all of the children of the business, whether they are actively involved in the operations of the business or not. Active children may receive voting growth shares while non-active children may receive non-voting, fixed value shares. Careful consideration of the management arrangements and the ownership arrangements along with opening a dialogue among family members will be necessary to ensure longevity to the succession plan and harmony among the family owner successors.
The tax component of succession planning looks at the minimization of taxes on transition and on death. Through the use of asset transfer tax strategies, we will assist our client to minimize taxes. The succession plan we develop with your other advisors and with you may include a re-organization of the corporation, an estate freeze, the sale or gifting of shares, as well as the preparation of a shareholders’ agreement to govern the new arrangements.
We will work together with our client’s other advisors to develop a cohesive and well-balanced succession plan which meets our client’s business values, goals, retirement desires and business and family circumstances.