Every April, we all turn our minds to getting our annual taxes completed. We gather our records, we meet with our bookkeepers and accountants and we look to the next year’s plan and goals.
This pandemic has changed so many things related to how we work, do business and plan for retirement. For some, working part-time or remotely opened up many new possibilities for our future plans and goals. We came to see new ways of operating our small businesses and that shifted the goal post for many small business owners, small proprietors and self employed.
For some, your small business or sole proprietorship has done well and your accountant may be advising at this time to incorporate the small business and continue operating as an Corporation for tax benefits or liability reasons.
In these instances, you will want to consult a lawyer as well as your accountant for advice and assistance on setting up your articles of incorporation, share structure and rolling any assets into the Company without triggering PST or other negative tax consequences. These steps are an important foundation for your future Company, are often technical or complicated and if any steps are missed or forgotten, it is far more expensive and time consuming to fix them at a later date.
The lawyer and accountant can also advise you as to the differences in operating an incorporated Company vs a small business or sole proprietorship so you do not miss any important changes you need to make in the Company’s operation.
For others, you have found that you are ready to retire and market your small business for sale or transfer it over to your children to take over in your stead.
If you are marketing and selling your small business, remember that this process can and should take several months. This allows enough time so that both sides of the transaction can establish a proper business buy and sell contract and do their due diligence regarding assets, tax obligations and employees. A lawyer can assist with the contract and any other steps to formalize the business transfer.
If you are transferring the business to your children or close family members, there are many ways of structuring this transfer to maximize the benefit for everyone. Perhaps you will want to stay on as an employee or advisor to guide the new owners for the first few months. Perhaps you will want to be bought out over time from the business proceeds, instead of a lump sum at the time of transfer.
A lawyer can assist in setting up the transfer and contracts or document the vendor buy-back loan to establish the timeline and ensure everything goes smoothly and everyone knows what is expected of them. A little organization and preparedness, as well as having the appropriate paperwork for this important transaction, means less confusion, disagreements or expenses if all does not go exactly as planned.
In fact, having the appropriate documents and plans in place often ensures it will go as planned, as there are many small things that need to be taken care of or dealt with that the parties to the transaction may not have even thought of. A little preparation and advice can go a long way to ensure the success of the sale or succession of the business that you have put all of your hard work and effort into and gain those rewards you were working towards!
If you have questions and would like a consultation, or for more information, please contact Priddle Law Group at (250) 434-8911 or email to make an appointment.