Tax Strategies

A layer of complexity is created as the value of your business assets transitions into your personal investments. Tax laws and regulations may be complex, requiring advice from a qualified tax advisor or consultant. Some of the tax strategies to discuss with your tax advisor when transitioning your business are:

Capital Gains Exemption

Description	The seller may be able to claim a lifetime capital gains exemption of $750,000 on the sale of shares
Key Benefits	Potential tax savings on sale of shares

Estate Freeze

Description	Original common shares exchanged for new fixed value preferred voting shares Family members (or trust) issued new common shares with nominal value New common shares have potential to grow in value in the future Tax liability of original shareholder is capped at value of newly received preferred shares
Key Benefits	May reduce tax liability of original owner on death Owner and/or family members may each be able to use the $750,000 capital gains exemption Allows for greater span of ownership Facilitates income splitting

Holding Company

Description	Places a layer between individual owner(s) and the operating company Often a key component of an Estate Freeze Often used to hold non-operating assets such as excess cash / investments outside the operating company Often used to distribute the ownership interest more broadly among family members
Key Benefits	Potential for income splitting with adult family members May qualify for the $750,000 capital gains exemption May be helpful in asset protection from creditor claims against the operating company

Family Trust

Description	Often used in conjunction with an Estate Freeze to allow family members to have an indirect ownership of a business Provides trustee with control over business and distributions to beneficiaries
Key Benefits	Maintenance of control Potential for income splitting with named beneficiaries or defined classes of beneficiaries Useful for eventual family succession planning May reduce probate fees

Remember your cross-border assets.

If you have business assets outside of Canada, you may find their sale to be taxable in that jurisdiction. Furthermore, the proceeds received on the disposition of foreign assets may trigger a second tax upon their return into Canada. Tax and legal professionals with experience in multinational transactions can suggest ways to minimize double taxation and smooth the transition of assets on your death.