1. Yesterday a dream Today a thriving business Tomorrow a legacy

2. Business Owner Succession Concepts
Security Canada
October 21, 2009
Angelo Bucciarelli- Freedom 55 Financial

3. Business Succession Plan
What is a succession plan?
How will your business be transferred to others?
What are the tax consequences?
Who will be impacted?

4. Business Succession Plan
Outlines how your business will be transferred to others
The steps necessary to prepare for the transition
Consider death, serious illness, disability and retirement

5. Business Succession Plan
Keep it in the Family
Buy/Sell Agreement with Partners
Sell to Third Party
How will you fund your retirement?
How should you invest the proceeds to generate the income you need?

6. Keep it in the Family Last Will & Testament Power of Attorney
Living Will
Beneficiary vs Estate

7. Keep it in the Family
If a family member takes over the business, what assets will be left for the other family members?
How will your spouse be taken care of once your child takes over the business?
Where will the money come from to fund the transfer?
Estate equalization
Estate Freeze

8. Buy-Sell Agreement
Provides an orderly change of ownership under certain circumstances
Death of principal
Disability of principal
Proper funding of the agreement can provide for
Family to receive fair market value for the shares
Capital to maintain their standard of living

9. Key Person Insurance
Will the loss of your key person impact the company financially?
Will there be a cost to replace this person?
Will you lose key clients?

10. Independent Alarm Dealer
Parallel Lives?
Sam Smart
Ned Notsomuch
Occupation
Independent Alarm Dealer
Age 40
Marital Status
Married, 2 Children
# of monitored Accounts
1000
Annual Sales
Annual Retained Earnings

11. Canadian Owned Private Corporation Taxes
Corporate Profit up to 500K
Tax Rate 16.5%
Retained Earnings
Salary
Dividend
Hold & earned interest
Corporate Owned Tax Advantage Plan

12. Retained Earnings Corp Held Investment Options
Sam Smart
Ned Notsomuch
Investment Type Corp held
Corporate Plan
GIC
How much? 20 Years
100K
Investment return 7%
Corp Tax Rate on investment 0%
48.7%
Cash amount in Corp at age 65 $ $
Estate Value at age 65 $
Cash amount in Corp at age 75 $ $
Estate Value in Corp at age 75 $
Transfer to Business owner
Tax Free
Taxed

13. GIC VS Corp Plan inside Corp

14. Retained Earnings Disbursement-Dividend
Sam Smart
Ned Notsomuch
Retained
Corporate Held Plan
Dividend
Tax Rate 0%
29%
Amount left for investment $ $
Taxes Paid by Age 65 $
Cash amount in Corp at age 65 $
Estate Value at age 65
Cash amount in Corp at age 75 $
Estate Value in Corp at age 75

15. Retained Earnings Disbursement-Salary
Sam Smart
Ned Notsomuch
Retained Earnings
Corporate Held Plan
Salary-Bonus
Tax Rate 0%
46%
Amount left for investment $
$54 000
Taxes Paid by Age 65 $
Cash amount in Corp at age 65 $
Estate Value at age 65
Cash amount in Corp at age 75 $
Estate Value in Corp at age 75

16. Retained Earnings Disbursements

17. Estate Value Growth

18. Sale of Incorporated Company
Sam Smart
Ned Notsomuch
# of Monitored Accounts
1000
Monthly recurring Rev (Ave $20)
20 000
Purchase Multiple
32X
22X
Proceeds
Type of Sale
Share
Asset
Capital Gains Exemption (750K)
Yes No
Potential Tax Payable $0
Fees
15 000
Net Proceeds $ $ 18

19. Business Succession Plan
What if you had a money machine in your basement.
Would you want to protect it?
What would happen if it broke?

20. Business Succession Plan
If you become disabled or die suddenly what will happen to your:
Family
Employees
Clients
Suppliers
Creditors

21. Disability Personal Disability Plan Tax Free Monthly Benefit to Age 65
Cost of Living 4% annual benefit
Regular Occupation Period Extension to Age 65
Partial Disability
Return of Premium 50%

22. Consider your future income loss: Assuming a 2% increase in income each year, these are your potential earnings up to age 65
Income potential
Current monthly income

23. Business Succession Plan
What would happen to your plan and your family if:
You become critically ill
Cancer, Heart attack, Stroke.....

24. Critical Illness Sam Smart Ned Notsomuch
Lump Sum Payment with diagnosis
Yes $0
Critical Conditions
Forced Sale
Return of Premium (personally)
Family hardship
Deplete savings

25. Business Succession Plan
What would happen to your plan and your family if: You Died yesterday?

26. Business Succession Plan
Financial Security at Death
Family change of lifestyle?
Liquidate Assets
Your Children’s future
Who else depends on you?
Access to cash at the exact time your family needs it!

27. Business Succession Plan
Financial Security at Death
Who would take charge of the business?
How will your estate be taxed?
Do you have any creditor protection in place?
How will your business be valued then?
Regularly review insurance to accommodate business growth?
Policy owned by your Operating Co, Holding Company, or personally?

28. Business Succession Plan
What does your retirement look like?

29. Retirement Options at Age 65
Sam Smart
Ned Notsomuch
Proceeds from Sale of Company $ $
Critical Illness Return of Premium
$84 680
Disability 50% return of premium
$9 829
Corporate Investment $ $
Which options would you prefer at retirement? $ $

30. Business Owner Succession Concept
2009 Max Contribution
Sheltered Growth
Access at Retirement
Transfer to Spouse upon death
Transfer to other designate upon death*
RRSP
$21,000
Yes
Taxable
Tax Free
*Taxable
TFSA-Tax Free Savings Account
$5000
Corporate
Plan
Unlimited
*exceptions may apply

31. Succession Planning for Business Owners
The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. This information is general in nature and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax expert.