When someone dies, particularly without a binding and well-communicated plan in place, it is not uncommon for disputes to arise regarding assets and succession. This is particularly true for business owners, who often own one more more complex nonliquid assets in their businesses. There are a few key decisions Ontario business owners can make in advance to ease this transition and avoid estate litigation.
The first decision that must be made is whether to transfer the business to another person, or to sell it upon the owner’s passing. This decision can be somewhat complicated if the business has multiple owners. It can also be complicated if the owner has a child or children interested in running the business who may not have the skills to do so, or if there are multiple children but only one is interested in proceeding with the business. However, avoiding this decision ultimately puts those left behind in a difficult position, so it is important to explore options and make wishes known.
Another decision relates to capital taxes. Should a business be sold or shares be transferred, capital taxes will likely be due. Business owners should calculate in advance whether the business can manage this expense. If not, making plans to liquidate the business or make other arrangements is advisable.
Contracts, shareholders, insurance plans and much more can influence the ultimate success of a business’s succession. Estate litigation is not uncommon in situations where plans are no well thought out, legally documented and communicated. For this reason, working with an Ontario lawyer is advisable when planning or administering an estate involving a business.