Did you know that there’s a silent partner in your business that benefits from you not having a succession plan? You know them quite well, and likely have dealt with them many times over the years – but you may not realize the impact they can have on your future. The Canada Revenue Agency (CRA) is the silent partner that’s often forgotten (EY Canada), but may have the most to say when you’re ready to transition out of the business.
With all outcomes, there are tax implications – and, as an owner, you don’t want to walk away leaving money on the table. Considering tax planning as a key element of succession planning will help you get where you want to go without giving up all of the wealth you’ve worked hard to gain in the business. In a 2012 article, the Financial Post recommends that business owners who are looking to sell should “start planning two or three years before the actual sale to reduce their potential tax bill” (Planning Now Can Save Taxes on Your Business Sale Later, Linda Richkum). Unfortunately, tax planning isn’t always a focus when it comes to planning for the future.
Too often we have come across clients who have gone through either tax planning or succession planning and assume that the other component is done. Both plans work hand-in-hand, but having a tax strategy doesn’t mean that your business will transition itself and having a succession plan won’t minimize your tax liabilities. At the end of the day, no matter what your outcome, you want to maximize your wealth when you exit your business. Having a succession plan is a great starting point, but not considering the potential tax implications and making changes now to minimize the future liabilities might mean that you’re leaving money on the table.
There are a variety of tools at your disposal when it comes to tax planning. For example, knowing that an asset sale will have different tax implications than a share sale gives you the chance to mitigate the liabilities prior to the transaction with proper planning. Certain scenarios may also qualify for the lifetime capital gains exemption, which may be able to shelter a certain amount of capital gains from tax (How to Realize the Value From a Private Business, Samantha Prasad). Tax specialists are aware of these and other benefits available to you. Their job is to advise you on the best option that will result in the most favourable outcome while supporting your succession plan– so you can maximize the wealth of your business upon exiting.
Our goal at EKSIT Strategies is to help you build the road to your ideal outcome and take you down that path to maximize your wealth. By formulating a succession plan and including tax planning as one component of the overall strategy, your business will continue to move forward towards your ideal outcome and you will truly maximize your wealth in the end.
Take Control of Your Future. You’ve Earned It.