Succession Planning for Business Owners

May 3, 2021/in Blog, Business Owners, Estate Planning, Family, life insurance /by Exceedia Consulting

Succession Planning for Business Owners

Business owners deal with a unique set of challenges. One of these challenges includes succession planning. A succession plan is the process of the transfer of ownership, management and interest of a business. When should a business owner have a succession plan? A succession plan is required through the survival, growth and maturity stage of a business. All business owners, partners and shareholders should have a plan in place during these business stages.

We created this infographic checklist to be used as a guideline highlighting main points to be addressed when starting to succession plan.

Needs:

Determine your objectives- what do you want? For you, your family and your business. (Business’ financial needs)
What are your shares of the business worth? (Business value)
What are your personal financial needs- ongoing income needs, need for capital (ex. pay off debts, capital gains, equitable estate etc.)

There are 2 sets of events that can trigger a succession plan: controllable and uncontrollable.

Controllable events

Sale: Who do you sell the business to?

Family member
Manager/Employees
Outside Party
There are advantages and disadvantages for each- it’s important to examine all channels.

Retirement: When do you want to retire?

What are the financial and psychological needs of the business owner?
Is there enough? Is there a need for capital to provide for retirement income, redeem or freeze shares?
Does this fit into personal/retirement plan? Check tax, timing, corporate structures, finances and family dynamics. (if applicable)

Uncontrollable Events

Divorce: A disgruntled spouse can obtain a significant interest in the business.

What portion of business shares are held by the spouse?
Will the divorced spouse consider selling their shares?
What if the divorced spouse continues to hold interest in the business without understanding or contributing to the business?
If you have other partners/shareholders- would they consider working with your divorced spouse?

Illness/Disability: If you were disabled or critically ill, would your business survive?

Determine your ongoing income needs for you, your spouse and family. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?
Will the ownership interest be retained, liquidated or sold?
How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? Does the business have a savings or insurance program in place to address this?

Death: In the case of your premature death, what would happen to your business?

Determine your ongoing income needs for your dependents. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?
Will the ownership interest be retained, liquidated or sold by your estate? Does your will address this? Is your will consistent with your wishes? What about taxes?
How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? How will this affect your employees? Does the business have a savings or insurance program in place to address this?

Execution: It’s good to go through this with but you need to get a succession plan done. Besides having a succession plan, make sure you have an estate plan and buy-sell/shareholders’ agreement.

Because a succession plan is complex, we suggest that a business owner has a professional team to help. The team should include:

Financial Planner/Advisor (CFP)
Succession Planning Specialist
Insurance Specialist
Lawyer
Accountant/Tax Specialist
Chartered Life Underwriter (CLU)

Next steps…

Contact us about helping you get your succession planning in order so you can gain peace of mind that your business is taken care of.

Retirement Planning for Business Owners – Checklist

August 3, 2020/in Blog, Business Owners, corporate, health benefits, life insurance, long term care, pension plan, rrsp, Tax Free Savings Account /by Exceedia Consulting

As a business owner, one of your challenges is learning how to balance between reinvesting into the business and setting money aside for personal savings. Since there are no longer employer-sponsored pension plans and the knowledge that retirement will come eventually, it’s important to have a retirement plan in place.

We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance to help you achieve your retirement dreams.

Income Needs

Determine how much income you will need in retirement.
Make sure you account for inflation in your calculations.

Debts

You should try to pay off your debts as soon as you can; preferably before you retire.

Insurance

As you age, your insurance needs change. Review your insurance needs, in particular your medical and dental insurance because a lot of plans do not provide health plans to retirees.
Review your life insurance coverage because you may not necessarily need as much life insurance as when you had dependents and a mortgage, but you may still need to review your estate and final expense needs.
Prepare for the unexpected such as a critical illness or a need for long-term care.

Government Benefits

Check what benefits are available for you upon retirement.
Canada Pension Plan- decide when would be the ideal time to apply and receive CPP payments. Business owners are in a unique position to control how much can be contributed to CPP by deciding to pay salary or dividends. (Dividends don’t trigger CPP contributions.)
Old Age Security- check pension amounts and see if there’s a possibility of clawback.
Guaranteed Income Supplement- if your income is low enough, you could apply for GIS.

Income

Are you a candidate for an individual pension plan (IPP)? IPPs can provide higher contributions than typically permitted to an RRSP and the ability to create a lifelong pension.
Check if your business is a candidate for a group RRSP or company pension plan. This is a great way for you to build retirement savings and provide benefits for your employees and business too.
Make sure you are saving on a regular basis towards retirement- in an RRSP, TFSA, or non-registered. Since you can control how you get paid, salary or dividends, dividends are not considered eligible income to create RRSP room, therefore you should make sure you have the optimal mix of both to achieve your financial goals.
Ensure your investment mix makes sense for your situation.
Don’t forget to check if there are any other income sources. (ex. rental income, side hustle income, etc.)

Assets

The sale of your business can be part of your retirement nest egg. Therefore, you should make sure you know the valuation of your business and your plan to sell the business to your family, employees, partners or a third party. You should also know when you decide to sell your business too.
Are you planning to use the sale of your home or other assets to fund your retirement?
Will you be receiving an inheritance?

One other consideration that’s not included in the checklist is divorce. This can be an uncomfortable question, however divorce amongst adults ages 50 and over is on the rise and this can be financially devastating for both parties.

Next steps…

Contact Us about helping you get your retirement planning in order so your retirement dreams can be achieved.

10 Essential Decisions for Business Owners

July 2, 2019/in Blog, Business Owners, Estate Planning /by Exceedia Consulting

10 Essential Decisions for Business Owners

Business owners can be busy… they’re busy running a successful business, wearing lots of hats and making a ton of decisions. We’ve put together a list of 10 essential decisions for every business owner to consider.

10 essential decisions for a business owner from considering corporate structure to retirement and succession planning.

The essential questions include:

Best structure for your business (ex. Sole Proprietor, Corporation, Partnership)
Reduce taxes
What to do with surplus cash
Build employee loyalty
Reduce risk
Deal with the unexpected
Retire from your business
Sell your business
Keep your business in the family
What to do when you’re retired

As a financial advisor, we are uniquely positioned to help business owners, talk to us about your situation and we can provide the guidance you need.

Contact Us

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