Business Owners - Wealth Management and Financial Planning: Common Questions

Q. As a business owner, what kind of insurance do my business partner and I need?

A. You both need sufficient life insurance to buy the deceased partner’s half of the business from their heirs, if that’s your plan. Consider disability insurance in case either of you can’t work and the business must hire people to replace you. Meet with a qualified insurance representative with experience dealing with businesses to determine your needs based on your business and personal situations.

Q. My business has built a considerable reserve. How should we invest it so it’s there if we need it but also earns a decent return?

A. One thing to consider is whether you may want to sell the shares of your business in the future and use your capital gains deduction. To ensure your business qualifies, keep passive assets such as investments in a holding company. Are you likely to do an estate freeze in the future? Will your beneficiaries receive their inheritance when you sell the company or when you die? Talk with a qualified investment advisor to determine how passive investments may affect your tax and estate planning.

Q. I am going to sell my business in a few years. How can I minimize tax on the sale?

A. You can reduce tax on a business sale by using the capital gains exemption. You may be able to use a trust and have family members use their exemptions too. Consult advisors who specialize in this area to determine whether your business qualifies for the exemption. Creating a plan early is the key to avoiding pitfalls and maximizing tax savings.

Q. A friend died recently. He had a successful business but it fell apart without him – his family hardly got anything from it. How can I prevent this from happening to my business?

A. Are you counting on the sale of your company to provide for your family? Ask an accountant with experience dealing with businesses how to ensure your company is structured to facilitate tax-efficient sale. Who will run the business when you’re gone? Is everything in your head? You need a structured business succession plan – work with advisors who have experience creating them.

The experts at Dedicated Financial Solutions in Mississauga can give you professional advice and guidance on these and other questions. Contact them today.


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