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Planning for succession: a huge win in the fight against unfair tax laws

Update, June 2021: Great news! After many years of fighting for fairer tax treatment of small businesses, we’re thrilled to announce that it will soon be easier for you to transfer your business to a family member. Bill C-208 has passed the Senate, meaning you will be treated the same whether you sell your business to a family member or to a complete stranger – rather than incurring a higher tax bill just for keeping it in the family. 

This is the culmination of years of efforts by CFIB and our members, who have signed petitions, answered our surveys and written to MPs to stop this unfair tax treatment of family businesses.

The bill still needs to receive Royal Assent, so we will update this page again with more details. Stay tuned. 

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Whether you’ve just started your first business or your doors have been open for a long time, succession planning should be an essential part of your overall business plan.

Unlike many salaried employees, you don’t have access to a pension plan, which means that you’ll probably have to rely on the sale of your business to see you through your golden years. On top of this, if you’re looking to keep the business in the family when you retire, it can actually be more expensive to sell or transfer it to your kids than to a third party.

CFIB is fighting to ensure that you’re able to successfully plan for retirement, and that you have the necessary tools and resources at your disposal.

Lifetime Capital Gains Exemption: More money for your future

After 15 years of advocacy, CFIB was able to win the initial Lifetime Capital Gains Exemption (LCGE) in 1987. The LCGE applies to qualified small business shares and exempts you from being taxed on some or all of the gain when you sell or transfer your business. This means that you are able to keep more of the proceeds from the sale or transfer of your business. Learn more about the LCGE.

Since then, we’ve kept the fight going:

  • In 1994, we stopped the government from eliminating the LCGE altogether.
  • We secured increases to the LCGE in 2008 and 2014. The government agreed to an increase for farmers and fishers in 2015.
  • In 2015, the exemption was indexed to inflation. For farmers and fishers, it is $1,000,000.
  • In 2021, the exemption is valued at $ 892,218.
  • We fought against the government’s proposed tax changes that would have made it harder for you and your family to access the LCGE.

Now, we’re asking the government to increase the LCGE to $1,000,000 for all small businesses and expand it to include some assets, allowing more small companies to benefit from this measure.

Passing down your business to the next generation

Currently, when you sell your business to a family member, the difference between the sale price and the price originally paid is considered a dividend. But if you sell it to an unrelated person, it is considered a capital gain—meaning it isn’t taxed as heavily.

What we asked for

We want the government to allow you to defer taxes on capital gains from the transfer of your business, and make it easier to access the LCGE when you sell your business to your kids. In past, former NDP MP Guy Caron and Liberal MP Emmanuel Dubourg had proposed legislation to make this happen, and we have supported their proposals as we supported Conservative MP Larry Maguire’s Bill C-208, which has now made it through Parliament. 

Once fully implemented, Bill C-208 will amend the tax act so that most intergenerational transfers of businesses will be treated more fairly and will now get the same tax treatment as if they sold to a third party.

Start planning your retirement!

While you may be years away from even thinking about retirement, it’s still important that you have a solid plan in place! Find out more about how to build a succession plan or chat directly with your CFIB business counsellor.

Since these are complex measures, we recommend talking with your financial planner when you’re ready to put your own succession plan together so that they help walk you through the steps.

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Topics in this Article: Taxes