Making children a Shareholder of a Family Corporation

This topic has come up again and again as we consult with families who have businesses. Should we make our children a shareholder, or shouldn’t we? This question, and subsequent decision, requires thought and planning. Two of the major areas to consider are tax and estate planning. How close is the family? Many kids go estranged as they become adults or marry a spouse that could influence the Corporation. This could cause an issue if you’ve issued voting shares. Voting shares have control of the company and have the value in a Corporation, while non-voting shares are used by many simply to issue dividends only. Remember that your children must be 18 to receive dividends. You must also realize that it is a business and must be treated as a business. If you are going to add your children as shareholders to the Corporation it should be updated in the Minute Books to reflect the changes, and a shareholder agreement should be done. There is a much better method of including children in the “benefits” of your business and passing the business and estate on to them tax free. A Family Trust can simply own the Corporation, making the children beneficiaries of the trust. You are the Trustee who makes the decisions and you can simply change beneficiaries and directors when you are ready. There are many more benefits to a family trust, please do inquire if you have questions.