How to Plan for Business Succession Today

1. How to Plan for Business Succession Today

2. Operating a small business can be a rewarding and valuable experience for owners. However, a time comes when, essentially, all small business owners will need to look ahead and plan for the future of their business. There may come a point at which the original owner is no longer part of the operation due to reasons such as retirement, incapacitation, inability to continue running the company, or death. Preparing a transition plan earlier in the company’s life can provide both peace of mind and a well-defined, orderly process to follow in the future. Here, we’ll examine how Edmonton business lawyers can help you to make preparations to deal with these eventualities.

3. Assessing Value An understanding of the company’s current (and possible future) value is essential for transition planning. Without a clear understanding of the company’s value, setting a price for a potential sale becomes much more challenging. A financial audit may be wise to assess the full range of value across asset classes and to gain a better understanding of the company’s financial health. During value assessments, examine elements such as: • Cash on hand • Hardware and equipment owned by the business • Outstanding stock • Real estate and property assets, and others.

4. To extract the best possible value from a transition, consulting with a business lawyer may be prudent, ensuring you do not miss any potential value opportunities. Exploring Tax Considerations Transitioning a business to a new owner involves complex tax considerations, including capital gains tax, as well as the potential application of the lifetime capital gains exemption. If an owner intends to transition the business to family heirs, doing so can create a more challenging tax situation for the family in the future. However, there are legal strategies, such as estate freezes, that can minimize this impact.

5. The structure of your business will also impact taxes during a transition. Because there are numerous ways taxes can affect a company during a sale, professional insight from business and estate planning lawyers can help owners achieve a more favorable outcome. Setting Up Buy-Sell Agreements A buy-sell agreement is a contract executed before a transition event that outlines a clear plan for transferring business assets to another party. Buy-sell agreements typically remain dormant until a triggering event, such as the owner’s retirement or death. Upon such an event, the contract comes into force. They may lay out:

6. How to value the business at the time of the event. • How the ownership transfer will take place and to whom the business will transition. • How to set a purchase price and define the payment terms. Using a lawyer, business owners can craft these agreements to ensure all other partners in the business receive equitable treatment. Buy-sell contracts can provide a clear path for an orderly transition following an event that may otherwise be very disruptive. Making Shrewd Plans Today for the Future

7. Business transfers can be a source of stress and confusion, particularly given the complex nature of these processes. With a nuanced tax code, proper planning is crucial to ensure a satisfactory outcome for all parties involved. At Lypkie Henderson, our team of experienced Edmonton corporate lawyers can support you throughout this process, from assisting with valuations to creating buy-sell agreements. Reach out to our firm today to learn about the first steps towards a future transition.