Many people wonder what succession planning is. Succession planning is simply the process of transferring your business to your children. However, there are many different ways of doing it.
As parents we all want what’s best for our children and we want them to be treated fairly. This is probably one of the hardest things to do when it comes to succession planning. The children that are not involved in the business usually feel left out and that when the business is transferred they will not receive anything which usually leads to family quarrels or the business being sold to a third party. The key to any plan is communication between parents and all their children. Lack of communication will certainly lead to fighting within the family. There is an efficient tool that can be used to financially take care of the siblings that are not involved in the business upon succession and it’s called life insurance. Most people will stop reading at this point because life insurance for most is a negative thing when in fact it is one of the keys to a great and efficient succession plan. The reason life insurance is such a great tool is because it is the cheapest way to pay out the other siblings that are not involved in the business and it comes at the exact time that it is needed. In every succession plan I’ve done the insurance was always cheaper than getting a loan and because the cost is so low it does not affect the cash flow or equity in the company to allow it to continue to grow until the succession plan needs to be settled. I would be happy to explain in detail and show examples of how the entire process works as there are many other aspects to a succession plan such as proper valuation of a company, taxes, capital gains, as well as the legal and accounting process to complete the plan.
Bourgouin & Associates
2A – 423 Main St.
Steinbach, MB R5G 1Z6
F: (204) 320-9167