St. Thomas Anglican Church, Belleville, Ontario, Canada (1910)

St. Thomas Anglican Church, Belleville, Ontario, Canada (1910)
Church Service Video
Image by Toronto Public Library Special Collections
St. Thomas Anglican Church, Belleville, Ontario, Canada

Creator: Valentine & Sons’ Publishing Co. Ltd
Date: 1910
Identifier: PC-ON 157
Format: Postcard
Rights: Public domain
Courtesy: Toronto Public Library

You can order order a print or high-resolution copy.

Roman Catholic Church, Amherstburg, Ontario, Canada (1910)

Roman Catholic Church, Amherstburg, Ontario, Canada (1910)
Church Service Video
Image by Toronto Public Library Special Collections
Roman Catholic Church, Amherstburg, Ontario, Canada

Creator: Unknown
Date: 1910
Identifier: PC-ON 37
Format: Postcard
Rights: Public domain
Courtesy: Toronto Public Library

You can order order a print or high-resolution copy.

Store and church, Aberarder, Ontario, Canada (1910)

Store and church, Aberarder, Ontario, Canada (1910)
Church Service Video
Image by Toronto Public Library Special Collections
Store and church, Aberarder, Ontario , Canada

Creator: H.R. Knowlton (Publisher)
Date: 1910
Identifier: PC-ON1
Format: Postcard
Rights: Public domain
Courtesy: Toronto Public Library

You can order order a print or high-resolution copy.

Christ Church, Bobcaygeon, Kawartha Lakes, Ontario, Canada (1910)

Christ Church, Bobcaygeon, Kawartha Lakes, Ontario, Canada (1910)
Church Service Video
Image by Toronto Public Library Special Collections
Christ Church, Bobcaygeon, Kawartha Lakes, Ontario, Canada

Creator: Valentine & Sons’ Publishing Co. Ltd
Date: 1910
Identifier: PC-ON 213
Format: Postcard
Rights: Public domain
Courtesy: Toronto Public Library

You can order order a print or high-resolution copy.

Methodist church, Ashworth, Ontario, Canada (1910)

Methodist church, Ashworth, Ontario, Canada (1910)
Church Service Video
Image by Toronto Public Library Special Collections
Methodist church, Ashworth, Ontario, Canada

Creator: T.C. Nicholls, B.A.
Date: 1910
Identifier: PC-ON 51
Format: Postcard
Rights: Public domain
Courtesy: Toronto Public Library

You can order order a print or high-resolution copy.

Transferring Business to Family Member in Canada

Transferring Business to Family Member in Canada

Transferring Business to Family Member in Canada

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Home Page > Finance > Transferring Business to Family Member in Canada

Transferring Business to Family Member in Canada

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Posted: Nov 17, 2010 |Comments: 0
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Transferring Business to Family Member in Canada

How do I transfer my business to my family members in Canada? As baby-boomers come closer to retirement, this question is on many of their minds.

As a Tax Accountant in Mississauga, I have assisted many business owners in successfully transferring all or a portion of their business to family members through the use of an Estate Freeze.

The mechanics of performing an Estate Freeze are described in detail below.

The Wrong Way – Transferring Business to Family Members in Canada

The biggest mistake that I have seen business owners make time and time again is that they sell their business to their family members for a nominal value, such as .

If it were that simple, everyone would do it. However, there are significant, negative consequences for selling your business for , when it’s worth a lot more.

For example, let’s assume that your business is worth 0,000, and that you sold it for to your adult child. As a result of selling your business for less than its actual value, the CRA will reassess the selling price to the fair market value of your business.

To determine fair market value of your business, the CRA will evaluate:
• The worth of your business’ tangible assets
• The future growth potential of your business
• The current revenues and profitability of your business
• The reputation of your business in the marketplace

Once the CRA has completed their valuation of your business, they will readjust the selling price from to 0,000, and will levy capital gains tax on the sale.

To make matters worse, your adult child will not receive an upward adjustment in the cost of the shares that he/she purchased from you. What that means is that, instead of having a cost of 0,000, the cost of the shares belonging to your adult child will still be . When your adult child wants to sell the family business at a later time, capital gains tax will be levied again.

To avoid disastrous consequences, I recommend that you consult with a Chartered Accountant and Tax Accountant in Mississauga, before you transfer your business to a family member in Canada.

Using an Estate Freeze – Transferring Business to Family Member in Canada
How can I transfer my business to my family members the right way?

“The correct method to transfer your business to a family member in Canada is to utilize an Estate Freeze,” says Allan Madan, Tax Accountant in Mississauga, Oakville and Toronto.

An Estate Freeze will allow you to:

• Transfer your family business to your family members without incurring any income tax whatsoever;
• Retain control of your business after the transfer; and
• Have a steady stream of retirement income.

So, how do you go about implementing an Estate Freeze?

Create a Family Trust – Implementing an Estate Freeze in Canada

The first step in implementing an Estate Freeze in Canada is to create a family trust.

A family trust is a legal document that states that the shares of your business are to be held by the family trust on behalf of your family members.

Why should use a Family Trust in the first place?

The biggest reason a family trust is used in an estate freeze is to allow you to retain control of your business, even after you have transferred your business to your family members.

Imagine that you sold you multi-million dollar business to your 19 year old son without a family trust. Your son may say, “Mom and dad, thanks for giving me your company. You no longer have control, so I’m going to buy a Ferrari and squander all of the money.”

A family trust can be complicated to establish. Therefore, I recommend that you consult with a lawyer and tax accountant in Mississauga.

Cancel Old Company Shares for New Preferred Shares – Implementing an Estate Freeze in Canada

The second step in implementing an Estate Freeze in Canada is to cancel your old shares in your company in exchange for new preferred shares.

Preferred shares are fixed in value, and are equal to the fair market value of your business immediately before the transfer of your business to your family members.

“Dividends should be paid on your preferred shareholdings, in order to ensure that you have a steady stream of income during your retirement years,” says Allan Madan, Tax Accountant in Mississauga, Toronto and Oakville.

Issuing Common Shares to Family Trust – Transferring Business to Family Member in Canada

The third step in implementing an estate Freeze in Canada is to issue common shares in your company to your newly created family trust.

This will result in having the future growth in the value of your family business accruing to your family trust.

Summary of Transferring your Business to Family Members

We started with the question, “How do I Transfer my business to my family members in Canada?”

The answer is to implement an estate freeze, which will allow you to:

• Avoid any income tax whatsoever on the transfer of your business to your family members
• Retain control of your business through the use of a family trust
• Ensure a steady stream of retirement income for yourself

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Allan Madan
About the Author:

Allan Madan is a Chartered Accountant and Tax Accountant in Mississauga, Oakville and Toronto, Ontario, Canada.

He has helped many business owners successfully transfer their business to family members in Canada.

Get access to Allan’s free report, 20 Free Tax Secrets on How to Beat the Tax Man, by visiting http://www.siteproweb.com/20-free-tax-secrets-from-allan-madan

To learn more about Allan Madan, see http://madanca.com or watch this video at http://madanca.com/Transferring-Business-to-Family-Member-in-Canada

Also, call to speak with Allan Madan at 905-268-0150.

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Article Tags:
how do i transfer my business to my family members in canada, transferring business to family member, save tax in canada, accountant mississauga, accountant toronto, accountant oakville, estate freeze

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