Our Senior Associate Partner Pavel Malysheuski answers a key question about business succession planning strategies for a family business.
YOUR QUESTION
I own a successful family business. However, I am starting to think about retirement. What business succession planning options should I consider given that the three generations of family members are now involved in the business to differing degrees.
PAVEL’S ANSWER
It is good to start these discussions early. There are different business succession planning solutions, depending on the family members’ objectives. Depending on the particular circumstances, the options that family business owners should consider include the following:
- Creating multiple wills to address shares of each corporate entity separately, in order to save . on estate administration tax in the future;
- An estate freeze and the issuance of brand new common (growth) shares to those family members who are interested in continuing the family business as owners/shareholders;
- Obtaining “corporate” life insurance and issuing “life insurance shares” to those family members who are not interested in participating in the business as owners and simply want to cash out when the time comes; and
- Corporate reorganization and insertion of a “sandwich” family trust in the business structure;
The potential solutions above are designed to optimize the tax burden on the business as well as the potential tax burden on family members, making the generation-to-generation wealth transfer as smooth as possible. There are other potential tax-efficient and practical business succession solutions depending on your business structure and your family’s overall objectives.
If you have business succession planning questions and would like to discuss your options, please contact Pavel Malysheuski at Boardwalk Law to learn more: [email protected] / 905.863.7428.
Pavel is a senior associate at the firm, practicing in the areas of corporate/commercial, wills & estate planning, and real estate law. Pavel is also an adjunct professor at Osgoode Hall Law School where he teaches commercial contract drafting and negotiation.
