What is next for your business?

The challenges of business succession

A successful entrepreneur in his 50s, Fred established his business from the ground up into a multi-million-dollar real estate enterprise in the greater Toronto area. The driving force spurring sales growth over the years, Fred built his company with hard work and attention to service.

Fred is married to Gloria, and together they have three children. To allow Fred to concentrate on his “fourth” child, the business, Gloria stayed at home raising their family. Their son, Corey, a recent university graduate, joined the family business. The other children are busy establishing professional careers.

With over 70 employees, Fred feels a responsibility for the continuity of the business he built.

Meeting and discussion

His Richardson Wealth Investment Advisor invited Fred to meet with a member of the firm’s tax and estate planning team for a succession planning consultation.

In the meeting, Fred indicated his confidence regarding his business affairs, but admitted he has been putting off succession planning. The meeting explored “what if” scenarios to uncover potential issues that might arise in the event of Fred’s death and discovered that:

  • for some of Fred’s corporate interests, a Unanimous Shareholders’ Agreement mandates that the other shareholders would buy his interest
  • Fred has bequeathed everything to Gloria, including the business, under his will
  • Fred is unsure how Gloria would manage the business given her lack of business knowledge and relationships with his associates and employees
  • Corey is not ready to take over the business yet

Since Fred had endeavored to make sure all of his paperwork was in place, he was shocked to learn about the potential conflicts brewing between his business and personal planning.

The solution

With insight and information from his Advisor and Richardson Wealth tax and estate planning specialists, Fred enlisted their support to develop a business succession plan, including Gloria and Corey throughout the process.

In the interim, Fred contacted his lawyer to update his will for consistency with the Shareholders’ Agreement. He scheduled a meeting with a Richardson Wealth insurance specialist to review his existing corporate-owned insurance, which is intended to provide funds to the shareholders in the event of his early death.

Corey began to prepare to take over the business on a 5-year timeline, employing the help of strategic coaching. 

The next step for Fred and Gloria, with help from the advisory team at Richardson Wealth, would address estate planning for the entire family.

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