Business Succession as Part of Your
Financial Security Planning
This article is the second in a series of articles on business succession planning
and related subjects. It is meant to guide business owners through the process
of maximizing their personal financial security upon the transfer of business ownership.
By Joe A. Salib, CFP
Business succession planning is part of a larger planning process: Financial planning for the business owner. It covers all aspects of your financial situation on the personal side as well on the business side. It helps ensure that:
• You have enough income in retirement.
• You are currently maximizing your tax planning opportunities.
• You have a saving plan to cover anticipated future expenses such as children’s education,
property purchase…
• The financial needs for you, your family and your estate are met in the event of disability or
premature death.
• You have an estate plan that helps ensure that your assets go to your intended beneficiaries and minimizes taxes.
Your planning focus will also shift as your business moves through the stages of the business cycle.
Survival Stage
You are concerned mainly with your personal financial planning. This would include:
• Risk management: Dealing with issues such as premature death, will, estate equalization, disability and critical illness.
• Retirement planning: Registered plans, asset allocation, non-registered plans and creditors’ protection.
• Other saving goals: Children’s education, home purchase and tax minimization.
Early Growth Stage
You are focused on business continuation planning to ensure that the business will weather unforeseen events and preserve its value:
• Key person protection.
• Buy-sell agreement between partners/shareholders to cover any
eventuality such as premature death, disability or critical illness.
• Business loan protection.
• Executive benefit planning to retain key people and ensure a proper tax planning for the business and the individuals.
Continuing Growth Stage
Your main focus in business succession planning:
• Ownership transition: if you are planning to sell, liquidate or retain the business ownership in the family.
• Successor training and buy-sell agreement among successors.
• Management transition.
• Retirement income planning.
Maturity Stage
During this stage, your focus is on Estate planning:
• Will planning including estate equalization and family law issues.
• Powers of attorney.
• Tax planning: Estate freeze, share redemption and liquidity.
• Retirement income planning.
• Trust planning: Family and spousal trusts.
• Philanthropy.
Through the above stages, your personal circumstances will obviously affect your planning and your priorities at each stage. Yet some of the legal and financial instruments you are putting together in the early stages will be beneficial in the later stages of your business.
It is essential to have a long term vision of where you want to be. Your planning process will help you express that vision and ensure that you are always heading in the right direction. To achieve your goals, it is essential to have this long term vision and a plan flexible enough to adapt to your changing needs.
Joe A. Salib, is a Certified Financial Planner with Sun Life Financial and active in investments and insurance strategies for individuals, business owners and professionals.. He can be reached at 416-407-0748, email: joe.salib@sunlife.com
Our next article: Business Succession: The Team Approach
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