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Table of Contents:
What is the best structure for your business?
Whether you already own your business, are thinking of starting a business from scratch or are buying an existing business, choosing the right business structure can have a major impact on the future success of your enterprise as well as your personal tax and estate planning.
Your decision should take into account a range of factors including the nature of your business and where it’s located, the number of people involved, taxation considerations, your potential exposure to liability and the company’s financial requirements.
Consult an experienced legal professional and tax accountant. Your professional advisors can help ensure that you are well informed on the legal and taxation issues you may encounter and that you understand the personal and business implications of your decisions.
A sole proprietorship is the simplest form of business organization and is often the most inexpensive to set up. This can be a good option for small enterprises or when you are just starting your business because you, as the business owner, have direct control over business decisions and receive all the profits. However, with this kind of structure, you are legally responsible for the debts and obligations of the business. This means that both your business and personal assets may be subject to the claims of creditors. This is called “unlimited liability”.
How is a sole proprietor taxed?
You must file a personal tax return to report your business income. You should include the income, or losses, from your business on your personal tax return as part of your overall income for the year. Your net business income is taxed as personal income, so there are limited tax planning opportunities; however, you may be able to deduct your business losses from your other income sources.
Partnerships can be relatively easy to set up and often have low startup costs. A key advantage of having partners is that they generally bring additional sources of investment capital and provide a broader management base. However, finding suitable partners can be a challenge. In addition, this kind of business structure can mean a division of authority, so there is potential for conflict between the partners. A written partnership agreement, though not required, can help minimize potential conflict. In many cases it sets out the terms of business, protects the interests of individual partners in the event of disagreement or dissolution of the business and generally defines how the partners will share the business profits.
Your personal liability for the business and the actions of your partners can differ depending on the type of partnership. Be prepared for the possibility that your partners’ decisions will be legally binding on you, and ensure you discuss all aspects of this decision with your legal advisor.
If you are considering investing in a partnership, you should review the tax and legal implications carefully with your professional advisor.
How is a partnership taxed?
A partnership is not a taxable entity. This means that instead of the partnership paying tax, the partnership’s income or loss flows to the individual partners, who report their proportionate share of income or loss on their personal tax returns.
Corporations are a very popular business structure. A corporation is a separate legal entity from its shareholders and has the legal characteristics of an individual. It can own property, incur legal liability, lend, borrow and carry on a business.
If you’re thinking of starting or investing in a corporation, there can be a number of advantages. It can provide greater business continuity as shares can be bought and sold without affecting the company’s continued operation. It is also easier to raise investment capital for a corporation, and you may find that the size and resources of an incorporated business make it easier to attract specialized management expertise. In addition, as an owner-manager and a shareholder, your liability is generally limited to your shareholding, so your personal assets are protected from the company’s creditors unless you have provided personal guarantees for loans to the corporation.
It’s important to obtain legal advice when setting up or acquiring an incorporated business. Corporations are more closely regulated than sole proprietorships or partnerships and may be more costly to set up. You will be required to hold annual shareholder meetings, meet certain record-keeping obligations and comply with requirements under the legislation governing their corporation. This can mean more administrative, legal and accounting expenditures.
If you are a professional and are thinking of incorporating your practice, please review Appendix 2 for information specific to professional corporations.
How is a corporation taxed?
Since a corporation is a separate legal entity, a corporation files its own corporate tax return and pays taxes on the income it earns. A corporation’s income is calculated separately from the business owner’s or shareholder’s personal income.
Which business structure is right for you?
| ||Sole proprietorship ||Partnership ||Corporation |
|Cost ||Lowest cost option ||Relatively low start-up costs ||Higher set-up and ongoing costs |
|Level of control ||Direct personal control ||Shared with partner(s) ||Potentially shared with a number of stakeholders |
|Legal liability ||Unlimited personal liability || |
General partners: full liability jointly shared between partners
Limited partners: liability limited to amount invested
|Liability transferred to corporation, which posses same legal rights, obligations, and liabilities as a person |
|Convenience ||Easiest to set up and manage ||Generally easy to set up and manage ||Typically more complex administrative requirements, including tax, legal and regulatory filings |
|Business continuity ||Difficult due to its reliance on a single individual ||Other partners can help ensure continuity ||As a separate legal entity, a corporation can continue even when its original shareholders move on |
|Investment capital ||Raising new capital can be difficult ||Partners can bring investment capital ||Shareholders can invest substantial new capital |
|Tax considerations ||Taxed personally ||Partner's share of profit/loss is taxed personally ||Corporation files the tax return. Tax advantages can include small business deduction, capital gains exemption and income splitting |
Tax planning for corporations
As an owner-manager, you may be able to benefit from some of the tax planning opportunities available to incorporated businesses:
- The small business deduction provides potential tax-deferral opportunities and a reduced corporate tax on active business income up to the small business limit that is retained in the corporation.
- If your business qualifies as a qualified small business corporation (QSBC), all or a portion of any gain realized on the sale of the shares can potentially be sheltered from personal taxation using the capital gains exemption.
- By incorporating, you may have the opportunity to split income and reduce taxes by paying dividends to adult family shareholders.
- Adding other family members as common shareholders directly or through a family trust (referred to as an “estate freeze”) can allow you to transfer future tax liability on the growth of the company to lower income family members and multiply the use of the capital gains exemption on the sale of QSBC shares.
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How can you reduce taxes?
As a business owner, you may have substantial personal assets invested in your business in addition to the long term commitment you have made to your business and its employees. This can have significant implications, not only for you and your business but also for your family’s financial security.
To protect your investments, both business and personal, your business strategy should include carefully structured tax and estate planning components to ensure you have organized your assets in the most tax effective manner and utilized the tax planning strategies that are available for the benefit of your business and your family.
Personal tax planning
There are several income-splitting strategies available to owners of private corporations in Canada that may benefit you and your family. They include:
Income splitting by paying a salary to family members: Consider income splitting with lower-income family members by employing them in the corporation and paying them a reasonable salary based on the services they perform. The salary they receive will also create Registered Retirement Savings Plan (RRSP) contribution room for them and generate Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) pensionable earnings. Note that the tax rules provide a disincentive to paying a salary or bonus that exceeds the value of the services rendered.
Income splitting by paying dividends to adult family members: If you have an active corporation, you may be able to transfer some or all of the future growth of the business to the next generation of your family using an estate freeze with a family trust. This common business succession strategy allows you to income split by paying dividends from the corporation to your spouse and adult children. If they have no other income, they may be able to receive substantial tax-free dividends from the corporation (the amount varies depending on the type of dividends and the family member’s province/ territory of residence). While this strategy may help you minimize and defer tax, there may be situations in the future where you may wish to unwind or dissolve the structure. Ensure that this flexibility is available in the design of your estate freeze before it is initially put into place.
Multiplying the capital gains exemption: It is possible to “multiply” the capital gains exemption available to you and your family on the sale of the qualifying shares of your business. This could significantly increase the family’s after-tax assets following the sale. One way to do this is by having your operating company owned by a family trust where your family members are the beneficiaries of the trust. When you sell the qualifying shares owned by the trust, the resulting capital gains can be allocated to each beneficiary and they can each claim their capital gains exemption. For example, a family of four can claim four times the capital gains exemption versus the business owner, who can claim the capital gains exemption only once. This results in additional tax savings for the family.
You may also wish to consider some potential estate planning opportunities. Freezing the value of your estate can help you limit your tax liability on death. You can also defer capital gains on the future growth of the business and attribute them to the next generation while retaining control of the business. This may also allow other family members to use their capital gains exemptions.
Remember that for these strategies to be effective, the interest, dividends and capital gains must be paid or payable by the family trust to the beneficiaries. The funds will no longer belong to you as the parent or business owner, so ensure this is a practical strategy for your circumstances.
Tax planning for your business
If you’re the owner of a private Canadian corporation earning active business income, consider whether the following strategies would work for your business:
Setting up a retirement plan: Consider setting up an Individual Pension Plan (IPP) as part of your retirement plan. An IPP is a defined benefit pension plan that, in certain situations, provides greater annual contribution limits than an RRSP. IPP contributions increase with the age of the plan holder. Contributions to the IPP are tax deductible for your corporation. The investments in the IPP grow on a tax deferred basis and are only taxable when you start withdrawing from the IPP. If investment earnings in the plan are lower than expected, you may be able to make additional contributions. IPP assets may offer creditor protection and typically suit business owners who are age 40 or older and earn significant employment income. This means that you will need to draw a salary from your business.
Maintain the status of your corporation as a qualified small business corporation: By maintaining your operating company’s status as a QSBC, when you eventually sell its shares, you may be able to take advantage of the capital gains exemption. This exemption is available to individual shareholders of active Canadian private corporations and can represent sizable tax savings. To qualify for the exemption, ensure your corporation meets the QSBC status. Certain corporate structures may make this easier. Since surplus assets may limit your ability to claim the exemption, you may want to transfer non-business investments to a holding company. This can “purify” the operating company and reduce the accumulation of non-qualifying assets.
Earning Canadian dividend income in a corporation: Canadian source dividends from corporations that are not controlled by the shareholder corporation are subject to a flat refundable corporate tax. If you are earning Canadian public company dividends in a corporation, consider paying out a dividend in the same year if you will be paying taxes at a lower tax rate personally.
Life insurance as a tax-exempt investment in the corporation: If you have surplus funds accumulating in your corporation, you may be taxed at a higher rate on the investment income earned in the corporation than if you earned this income personally (depending on the province/territory). You may also face double taxation on the assets within the corporation on death. Tax planning solutions are available that may help you address this problem. A corporate-owned tax-exempt life insurance policy can provide income protection for survivors, fund buy-sell agreements or pay capital gains tax on death. Life insurance premiums are generally not tax deductible, but it can be advantageous to purchase life insurance through a corporation rather than personally. The corporation’s surplus assets can be invested in the insurance policy, grow on a tax-sheltered basis during your lifetime, provide a supplementary source of retirement income and be paid to your beneficiaries as a tax-free death benefit.
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What should you do with surplus cash?
If you are the owner-manager of a private Canadian corporation and have surplus cash accumulating in your company, you may be wondering whether to retain the funds in the company or withdraw them while paying as little tax as possible. If so, there are a number of questions you should consider before you take action.
Is there a business need for the cash?
If you have surplus cash in your corporation, ask yourself if you will need it for business purposes in the short term. Will you need to use the cash to pay installments of income tax or GST/HST? Does your business experience seasonal slow periods when cash flow will need to be supplemented? Consider whether you will have to pay down debts or make any major purchases in the near future.
If you have excess cash that won’t be used for business purposes, the investment income earned on this surplus cash will be taxed at the corporate investment tax rates, which may be slightly higher than top personal tax rates, which vary by province/territory.
Do you need the surplus cash for personal purposes?
Do you have personal expenses that are coming due, such as income tax installments that must be paid on time? You may also be considering a major purchase like a vacation property or planning to help out with a family member’s education costs, wedding expenses or house down payment. If you know you will need to withdraw surplus funds from the corporation to meet these personal expenses, consider when you will need the funds. It’s important to understand the tax consequences of making the withdrawal and whether it will be possible to make several withdrawals over a period of time to minimize tax costs.
What are the funds going to be used for?
If you don’t need the surplus funds immediately for business or personal purposes, what are your reasons for moving funds out of the corporation? Sometimes, it may be beneficial to withdraw the funds from the corporation, as investment income earned on the excess funds remaining in the corporation may be taxed at a slightly higher rate than the highest personal tax rate. A good starting point is to analyze your long-term goals, which could include:
Planning for retirement – Are you going to use the funds for your retirement by contributing to an RRSP, IPP or RCA?
Estate planning – Do you want to enhance the value of the estate you will pass on to your family? Many potentially effective estate planning strategies involve insurance-based solutions. The funds may grow on a tax-sheltered basis and may be accessed at retirement to supplement retirement income, or they may be paid out tax-free on death.
Asset preservation – If you want to mitigate the risk of funds being subject to claims from corporate creditors, consider transferring excess cash to a holding company. There are various ways to accomplish this.
Tax planning – Keeping excess investments or an insurance policy in a corporation may disqualify your shares from being QSBC shares so that you are not entitled to the capital gains exemption on the sale of your business. Therefore, you may want to withdraw excess funds from the corporation. A properly structured corporation may allow you to extract cash from the operating corporation on a tax deferred basis.
Withdrawing funds from the corporation
If you’ve decided to take funds out of your corporation, consider potential strategies that could help you make the withdrawal and minimize the tax consequences.
Expense reimbursement – Keep records of business expenses you paid personally. If your corporation reimburses you, you won’t pay tax on the funds you receive and the corporation may get a tax deduction for the business expense.
Repayments of shareholder loans to the company – Shareholder loans, such as personal assets you transferred to the company without payment or dividends declared but never paid to you, can be repaid without tax consequences. You could also consider other nontaxable methods such as paying a capital dividend if your corporation has a positive capital dividend account balance.
Taxable methods of withdrawing funds from the corporation include paying yourself a higher salary or dividend. Although paying a taxable dividend results in personal tax, it may at the same time create a tax refund to the corporation if the corporation has a “refundable dividend tax on hand” (RDTOH) balance. In some circumstances, the refund to the corporation may be greater than the personal tax paid on the dividend. Income-splitting opportunities may also be available, for example, by paying a reasonable salary to a lower-income family member for services rendered or paying dividends to adult family member shareholders.
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How can you build employee loyalty?
As a business owner you know how important it is to recruit, reward and retain your top talent.
It can help ensure business continuity and protect the knowledge you have accumulated within your organization, and it may help you make effective succession planning decisions when the time comes. The loss of a key employee can be very expensive to an organization, so give some thought to how you can motivate key employees and keep them focused on the company’s priorities.
Employer-sponsored savings plans
Employees are increasingly conscious of the necessity to provide for their retirement. Employer-sponsored savings plans are one of the most important aspects of retirement planning and can help you ensure that your employees enjoy a financially secure retirement. Before setting up a retirement plan, discuss the options with your professional legal, tax and/or financial advisors. Here are some of the more common types of retirement plans offered by employers.
Group Registered Retirement Savings Plans (Group RRSPs)
Group RRSPs are one way you can encourage your employees to save for retirement throughout their careers. They could be an option even for a small business owner. These plans operate like regular RRSPs, possibly with additional restrictions, and can be more cost-effective and easier to administer than pension plans.
Registered Pension Plans (RPPs)
RPPs are employer-sponsored pension plans. In general, employer and employee contributions are tax deductible and the income earned within the plan grows tax-deferred. Funds accumulating within the plan for individual members are generally locked in by provincial/territorial or federal legislation. There are two kinds of RPPs:
Defined contribution (DC) and Defined benefit (DB) pension plans - Employees with DC pension plans choose the investments within their individual plans, and the retirement benefit is based on the value of the investments in the plan when the employee retires. This can be a less costly option than a DB plan for you as an employer and is easier to administer. In contrast, DB plans guarantee a specific benefit to the employee at retirement, calculated using a formula based on earnings and years of service. DB plans generally specify an age, usually 65, at which employees are expected to start receiving retirement income. As an employer, you face a potentially greater obligation with a DB plan than a DC plan because you are making the investment decisions and guaranteeing a fixed benefit to the employee at retirement. If there are insufficient funds in the plan, you may also be required to top up the plan by making a greater current cash flow commitment to the DB plan than expected. If there is a surplus in the plan, you may have reduced payments.
Business planning quick tip
Financial incentives like enhanced retirement benefits can help you retain your key employees, but don’t forget about non-financial aspects such as career development and work/life balance.
Enhanced retirement benefits
The following options may help you enhance the retirement savings plans of your key employees:
Supplemental Executive Retirement Plans (SERPs) - Limits on registered plan contributions and benefits can leave your higher-income employees with retirement benefits that are inadequate to maintain their standard of living. A SERP may help bridge the gap between the maximum pension available under the company’s RPP and what a higher-income employee would otherwise have received. It can also be a way to help you retain your valuable employees and encourage their long-term loyalty. One of the most common forms of SERPs is an RCA. An RCA is a non-registered pension arrangement that can help you provide supplemental pension benefits for key employees. RCAs have no contribution limits (provided contributions are “reasonable”) and no investment restrictions. Employees may also be able to benefit from certain investment strategies involving life insurance. This can provide supplemental tax-exempt investment income and may yield better results than alternative investments.
Individual Pension Plans (IPPs) - As previously mentioned, an IPP is a DB pension plan. It can be set up for a business owner but also for key employees to provide for their retirement. IPPs are typically suited for those who are age 40 or older and earn significant employment income.
Learn from experience
While financial compensation often attracts your key employees, non-financial benefits often help you retain them. Sufficient tools and time to do the job are essential to employee satisfaction, while training and career development help to keep them motivated. Aim to foster a social environment and a sense of team, and demonstrate your commitment by ensuring that work/life balance can be achieved.
If you lose a key employee, hold an exit interview so you understand the reasons for their departure. Their dissatisfaction may indicate problems among other key employees and may save you from another costly loss.
How will you reduce your risk?
Depending on the province/ territory you live in, placing funds in an insurance policy (life or segregated funds) may safeguard them from potential future claims.
As a business owner, you’ve worked hard to accumulate your assets, so it’s important to take precautions to protect them from risk. Review your situation and consider if you need to “creditor protect” your business. If you operate as a sole proprietor or a partnership, your personal as well as business assets may be at risk from creditors with a claim against your business.
There are a number of potential solutions. One is to keep your personal and business assets separate wherever possible and carefully structure your holdings to minimize your potential liability before any insolvency issues arise. This can be an effective way to protect yourself, particularly if you undertake such planning in the ordinary course of your business. The following are some other strategies that may help:
Protect personal assets
Gifting assets – If you gift assets to family members, you may reduce the number of assets that may be available to your creditors, but bear in mind that those assets may now be at risk from creditors of the family members who receive them. Unless the gift is to a spouse, it’s considered a sale at fair market value for Canadian tax purposes and could potentially trigger a capital gain.
Using insurance – Depending on the province/territory you live in, placing funds in an insurance policy (life or segregated funds) may safeguard them from potential future claims. In many cases the investment component of an insurance policy and the interests of the beneficiaries under the insurance policy may offer protection from the claims of creditors.
Sheltering assets within registered plans – Funds in an RRSP are potentially protected from creditors in certain provinces/territories. In very specific circumstances, some RRSPs have received a favourable judicial ruling following the death of the plan holder, particularly where there was a named beneficiary. Remember that registered pension plans governed by pension legislation may also offer protection from the claims of creditors, subject to specific exceptions.
Transferring assets to a formal trust – The legal ownership of the assets passes to the trustee, so, if properly structured, these assets could be protected from future creditors. However, you may lose control of the funds transferred, depending on the nature of the trust. Determine whether you can afford to transfer control of those assets. If you can, choose a trustee who you know will manage them appropriately. Remember there could be significant tax implications in placing assets in a trust, so obtain professional advice to ensure you understand the consequences before you make a decision.
It is possible to appoint RBC Estate & Trust Services as your corporate trustee. One of the key benefits of using RBC Estate & Trust Services as a corporate trustee is the security of knowing you are engaging experienced professionals to protect the interests and requirements of your trust. RBC Estate & Trust Services can administer the trust and invest the assets according to the directions set out in the trust agreement. Speak to your us for more information on how RBC Estate & Trust Services can help.
Safeguard your business
When you’re working on a strategy to protect your business assets from risk, certain actions can create the impression that you intend to put assets beyond the reach of creditors. This can work against you in the event of a lawsuit and can be particularly important if your company is experiencing financial difficulties. Try to avoid the following:
Transferring property for less than fair market value
Paying for property by cash instead of cheque
Transferring property without proper documentation
Transferring property where the transferring person retains an ongoing interest or continues to behave like the property owner
Transferring property without a change in possession
Protecting your corporate assets may involve transferring them between a number of separately incorporated businesses. The idea is that if one business fails, it won’t leave another in a vulnerable position. It is important to demonstrate that each corporation is a legitimate legal entity, carrying on business independently.
Ensure that transfers between companies occur at fair market value and are documented as though they occurred at arm’s length. To reinforce this, if you have a number of corporations with a common trade name, ensure that all documentation is prepared in the correct corporate name and signed by the authorized signing officer. Each corporation should have separate management, so try to avoid shared processes like accounting, banking and inventory management.
To protect your valuable business assets, an operating company should aim to own only the minimum number of assets necessary to carry on its business. If possible, these assets should be owned by another company and leased back to the operating company so they are not available to creditors in the event of a claim.
Benefits of incorporation
Incorporating your business may be one way to protect personal assets. As an owner-manager, you are only liable to the extent of your shareholding, so you are not personally liable for the debts of the company. Compare this with sole proprietors, who are personally liable for all the debts and obligations of their businesses, and partnerships, where you can be personally liable for the actions of other partners. If you do incorporate, be careful about giving personal guarantees for loans to your business. The protection provided by incorporation can be lost in such a case and you could be personally liable for the repayment of the loan.
Surplus assets in your business
Consider keeping cash reserves low. If you have accumulated surplus assets in your business that you don’t need for operating expenses, consider transferring them to a holding company. This can help protect them from creditors of the operating company. You should also consider the pros and cons of having your company contribute to an IPP. This can help boost your retirement funds and assets in an IPP are creditor protected.
Please contact us to review the opportunities you have to safeguard your personal and business assets from creditors.
What can you do to deal with the unexpected?
Would your business be prepared if a catastrophic event occurred? Do you have a plan to cover the potential loss of a key person who leaves by choice or due to a serious illness, a disability or death, or to mitigate the consequences of a divorce, which can have a substantial impact on a family business?
Planning ahead can help you limit the damage to the business you have worked so hard to build and to which you have committed so many resources. You protect yourself by insuring against risks like fire, damage to your premises and theft of equipment, but an unforeseen event for which you haven’t planned can seriously affect your ability to deliver services to your customers. Lack of planning can be detrimental to the value of your business, company morale and business performance.
Insurance can provide some financial security if you are unable to work or earn an income due to an accident or illness. As a business owner, your continued presence may be critical to the company’s ongoing success. Several insurance strategies may be particularly significant in ensuring business continuity and security:
Purchase insurance to help you pay overheads and specific expenses you will continue to be responsible for, even if you are temporarily incapacitated.
Fund a buy/sell agreement through an insurance policy. It can be a cost-effective way to enable business owners to purchase the shares of a partner or shareholder in the event of their death, a disability or a serious illness. This may allow you to take immediate steps to minimize the potential damage by reassuring employees, creditors, suppliers and investors; and ensure that the family of the partner or shareholder receives financial support.
Insure against the loss of a key person. Key person protection can be a cost-effective way to help protect your business against the consequences of losing a critical individual, whether they leave by choice or due to death, a critical illness or a disability. You estimate the financial impact of this loss on your company and insure against the occurrence of specific events. Your business may receive compensation to the extent of the coverage you have purchased, and this can help you manage unexpected expenses resulting from the loss.
Consider the potential benefits of providing group insurance for your employees. This can be a valuable addition to your compensation structure, can help ensure longterm employee loyalty and may make your company attractive to talented prospective employees.
Retaining top talent
Many organizations misunderstand what employees and prospective employees are looking for from an employer. This may be one reason why organizations have difficulty attracting employees with the skills they need.
For a large percentage of organizations, mental health is a major cause of short-term disability claims. The trend appears to be increasing. Employees claim that the main reasons for leaving their employer were stress, lack of confidence in management, dissatisfaction with opportunities for promotion, base pay and lack of work/ life balance.
Analyze the potential business consequences of losing your most talented employees. To retain these valuable people, get to know them, reward them, keep them challenged and engaged, foster a team environment, offer them growth opportunities and provide a comprehensive and competitive remuneration package. These factors may help you maximize productivity and ensure business continuity.
Consider a family business divorce strategy
Divorce can have a major financial and emotional impact on a family business. It can also have an adverse effect on non-family members who work in the business. Consider the impact a divorce could have on the company morale, relationships and business performance. You may be able to minimize some of the negative effects through careful legal, succession and tax planning, but don’t overlook the benefits of a comprehensive family business divorce strategy. It can be an invaluable piece of forward planning.
Consider a pre-nuptial agreement as a way to avoid some of the conflict associated with divorce. While it may be difficult to discuss the subject, such an agreement can be a great tool. If the family business is the family’s largest asset, a divorce can result in the sale of the business and division of the proceeds between the former spouses. In such a case the valuation of the business is often the central issue. It can be highly contentious and should be an essential element of a family business divorce strategy.
A business valuation expert used in a family business divorce strategy can help:
Resolve divorce issues and buy-out situations, as business partners will have a shared understanding of what the business is worth.
Achieve agreement on the fair market value of the business by obtaining input from everyone involved.
Obtain an objective valuation based on the research done.
Educate everyone so they understand the valuation and how it was determined.
If you plan for the unexpected, you can help your business weather developments that may otherwise have a potentially negative impact. In addition to insurance and strategies to retain your key employees and mitigate the effects of divorce on the family business, don’t forget basic precautions. Ensure that computer systems are backed up and that important business and operational information is effectively communicated throughout the company to reduce risk in the event of the loss of key individuals.