Succession Doesn’t Just Happen
(excerp from Small Business BC)
Succession planning is an important part of any business. When you buy, sell, pass on, or dissolve a business, there are a number of regulations that you need to be aware of.
Considerations for Buying or Selling a Business
In many ways, buying or selling a business is not unlike buying or selling real estate. However, there are specific regulatory considerations and complexities to consider.
Here are some special considerations particular to buying or selling a business:
- Legal issues. Selling your business can be tricky when it comes to legal issues. Although you can use the services of a good professional business broker (who will probably go through a 200-point legal checklist with you), you’ll likely need the services of a lawyer to finalize the sale.
- Accounting issues. Using the services of an accountant who specializes in small business before and during the sale of your business can significantly increase the value of your business. Your accountant can help you make sure your financial records are organized, and “investing in taxes”, two simple ways that can increase the sale price of your business.
- Land transfers. It’s important to note that if your business transaction includes the transfer of land (or lease), your business broker must be licensed by the Real Estate Council of BC (a “Trading Services” licence).
- Shares. If partial shares are being sold, the BC Securities Commissionregulates these transactions under the Securities Act.
- Overseas buyers. If you are a non-Canadian and would like to invest in a Canadian business, the Investment Canada Act requires that you fulfill certain requirements. Special tax requirements also apply to foreign investors. More information on investing in Canada can be found at the Invest in Canada website.
Family Succession: Passing Your Business Down to the Next Generation
Whether you would like your family to continue on with your business is up to you. The legal structure of your business, however, will determine what happens to it upon your death.
If you are a sole proprietor or a partnership, your business ceases to exist when you pass on. You can will the assets of a business, which are deemed your personal assets, to your heirs, but the business itself is effectively closed.
Incorporating your business allows your business to continue after your death. Refer to our Legal Requirements–Starting section for information on incorporating your business.
The Canadian Association of Family Enterprise provides excellent information and assistance with family business succession planning.
When You Would Like to Call it Quits: Dissolving Your Business
As in family succession planning, how you dissolve your business depends on its structure:
- Sole proprietorship or partnership. The process to dissolve an unlimited company is relatively easy since there is no legal separation between the owner of the business and the business itself. A Dissolution or Change of Partnership or Proprietorship Registration form can be found at the .
- Corporation. Dissolving an incorporated business in Canada is not as simple as closing your doors. There are specific procedures for ending the existence of a corporation which are outlined on Industry Canada’s website.
Refer to our Legal Requirements-Exiting section for more information on how to dissolve your business.