Business succession planning in Toronto

The current private business marketplace in Toronto

In the past 10 years we have experienced an incredible growth in the private business sector in Toronto.  From manufactures, consumer business, agriculture, construction, real estate or Technology...Toronto is the business hub in Canada and always will be as it has recently passed Chicago as the 4th largest city in North America.  With maturing companies in the GTA it is a buyers market, and with investors ( both domestic and foreign) looking to purchase existing cash flowing sustainable businesses, learning to take advantage and plan for succession/exist strategies is critical.

Succession Planning

As a business owner, one of the natural considerations when thinking about succession planning is passing the business down to your kids.  This may be a great fit in a family business, but for mid-market companies where the children have not worked in the business or to not have the necessary experience, skills, or interest this will not be the best option.  Proper succession planning starts with the right fit for the next owner/manager and the alignment of the business mission. This is the future for the company and you will want to make the right decision. Perhaps you look towards management for a buyout, or stay on board while bringing in an equity partner to assist in your transition period.  There is no right or wrong decision, but you have worked hard to build a great business  and must take the time to ensure you determine the following:

1)  Do you retain the business and find an equity partner?

2) Do you transfer the business to a family member?

3) Do you exist the business all together

Exist Strategy

If you want to sell the business and move on, you will want to engage an investment bank to assist with this process. Chances are this is a new process for you and you will want to have the right partner on your side to assist with marketing your company and locating a buyer.  Some of the considerations include working with a good M&A lawyer that knows the process and can facilitate the deal, and an accountant that has experience with the tax implications of business sale transactions.

Tax implications

When you pass down the business to a family member, to avoid tax implications you will want to execute an estate freeze.  Should you be selling the business, the tax implications will be a capital gain on the shares of the business and you can utilize a portion of the capital dividend account, and life time capital gains exemption to minimize your tax liability at the end of the day.


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