When “What If” Becomes “What Now”

December 2016

One of the most important – but often ignored – reasons for preparing for the future succession of a business is to minimize the fallout from the unexpected. It’s understandable that preparing for these types of situations usually falls to the end of the to-do list. Just the thought of such circumstances is enough for many to choose to ignore and focus on the tasks of a more immediate nature.

Succession planning and business ownership transfer

Yet, the potential for such instance is there. It’s unpleasant to think about what may happen should you as a business owner get seriously hurt in a car accident, contract a life-threatening illness while travelling, or take an unexpected turn that leaves you incapable of managing the business. While as tragic as these instances can be, the impact can go beyond just you as a business owner, and beyond your family, to affect the livelihood of your business, employees, and even your customers.

While things don’t always go according to plan, the business has a much better chance of surviving if the owner has made preparations, in advance, for it to continue without him/her there. How? With careful planning that encompasses all aspects to prepare for the ‘what if’, including:

  1. Succession Planning – Develop a strong and capable management team and delegate responsibility to the team.
  2. Insurance Planning – At least bi-annually, life and disability insurance policies should be reviewed to ensure adequate coverage in case of death, illness, or disability. Insurance strategies can often include funding the premiums using corporate assets in certain situations. This planning also involves the preparation and updating of proper wills and powers of attorney.
  3. Tax Planning – A proper corporate structure might allow you to multiply the Capital Gains Exemption on the sale of company shares, possibly eliminating all capital gains tax entirely.
  4. Exit Planning – Develop and communicate plans for the business so that key stakeholders (family and senior management) know and understand your wishes, and how to execute them in case of disability or sudden death (yes, that happens, too).
  5. Financial Planning – a solid financial plan could establish family assets in addition to the business investment; this way, debts can be managed to maximize interest deductibility.

Put the plans in motion to mitigate the implications of an unexpected, yet potentially disastrous situation. After all, “What if” can turn into “What now?” very quickly – but with the right team of proactive advisors in place, you can avoid a nasty outcome. 

Stay tuned for new posts in our succession planning series every Thursday. Missed a post? Read on here:

Post 1: Planning for success[ion]
Post 2: There's selling and then there's everything else...
Post 3: Keeping it all in the family ...or branching out from the family tree
Post 4: When 'What If' Becomes 'What Now?'
Post 5: Should I stay or should I go?
Post 6: Beware of the tax man
Post 7: Freezing value = saving long-term
Post 8: What it's worth now, and how
Post 9: There's value and then there's worth
Post 10: Visualize, then plan
Post 11: The key is transparency
Post 12: Keeping up with the paperwork
Post 13: Consider all options

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About Richter 
: Founded in Montreal in 1926, Richter is a licensed public accounting firm that provides assurance, tax and wealth management services, as well as financial advisory services in the areas of organizational restructuring and insolvency, business valuation, corporate finance, litigation support, and forensic accounting. Our commitment to excellence, our in-depth understanding of financial issues and our practical problem-solving methods have positioned us as one of the most important independent accounting, organizational advisory and consulting firms in the country. Richter has offices in both Toronto and Montreal. Follow us on LinkedInFacebook, and Twitter.

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