Passing on a Corporation Part 1

You may not want to sell or close your corporation or maybe your goal is to pass it on to someone such as your children, other family members, relatives or even friends.  If this is the case you are better to start the plan as early as possible.  You may not implement the plan until a later date, but it is imperative to have a plan.  When talking about passing on the corporation, we are really talking about passing on the shares, which is the ownership of the corporation.  When you have ownership of a private corporation you typically have control (directorship), which means you control the assets and the business of the corporation.  Because this is included in Estate Planning we are can break it down to 4 areas we are looking at in business succession: ownership, management, liability and taxes!

First and foremost, if you are planning on passing your corporation on to someone or some people such as your children, ensure that they really want to do it and that they have a passion for the product or service the business is selling. Also ensure they are capable of running the business and that they lead a lifestyle that can work with the business.  You don’t want them to take over the business and then either get bored with it, run it into the ground, or change it into something you would never approve of if you still owned it!  The sooner you get them involved in the business, the sooner you will see the reality of the possibility of passing on the business to them!  You may also want to give them incentives towards ownership while working there, and/or you may even want them to have some type of monetary contribution.  If they have to put in work and/or monetary contribution they are much more committed then if they were just handed the opportunity on a silver platter!

We’ll continue this blog series on Friday. Please visit us again!