Keeping it in the family or Management buy-out?
It’s natural to want to pass your business onto the next generation, but this requires that they have the knowledge, skills, and experience to run the company and take it forward. Regular meetings of all involved will keep everyone informed and provide a safe space to discuss business concerns. You may want to consider using a facilitator since there are bound to be conflicts arising from overlapping family and business lives.
There are also tax implications to be considered when passing the business to your children, especially with regards to the Lifetime Capital Gains Exemption. You will want to talk with an accountant or tax professional before making any decisions.
A management buy-out is essentially the purchase of the business by part or all of the existing management. Since the financing can be trickier, the owner’s exit is often gradual, with the transition taking place over three to five years. It’s important to ensure that all members of the management team agree with the vision, and are all truly interested in owning a stake in the business.
The management team needs to be strong and credible with a well thought-out business plan and sufficient financial backing. Both the business owner and the management team should engage independent professional advisors to guide them through the negotiations.
Start planning today
The overriding theme is to begin the process as soon as possible if you haven’t already. If done properly, succession planning is not a one-time exercise, but an ongoing process that you regularly update and amend as circumstances change.
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Finally, never forget that CFIB is here to help you. You can always call our counsellors if you have further questions.
Check out our succession report for recommendations on how government can make succession planning easier. Happy planning!