The importance of business succession planning

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Stephen Maltby

Business succession planning ensures the orderly transfer of business ownership - or transition out of a business management role - that meets the financial needs of the owner, and ensures that the business will continue to operate.

It addresses three important needs of a business owner:

1. It helps set the stage for an orderly transfer of ownership or management of the business.

2. Valuation planning and freezing techniques can be used to minimize the transfer tax costs associated with the transfer of a business interest to other family members.

3. Liquidity planning helps ensure that sufficient liquid assets are available to pay estate taxes or to provide additional liquidity to the business during a period of transition.

Succession planning is a complex task that requires a full understanding what an owner intends to receive from the business through either transition or the owner's retirement. The creation and implementation of an effective succession plan should include a thorough analysis of the underlying business, its management structure, competitive environment, and cash flows, as well as a mission statement that sets out basic procedures and policies for the business.

Periodic monitoring is required to ensure the provisions outlined in the plan are aligned with the changing needs of the business owner, and the business itself. Whatever the goal of your business succession plan, the key is to begin planning as soon as possible and to carefully choose and prepare your successor(s). Seek the commitment to carry out your wishes and the dedication to maintain and grow your business.

Stephen Maltby is an investment advisor and chartered accountant with CIBC Wood Gundy. He has been in the financial services industry more than 30 years and has held various accounting, investment and management positions with several accounting and investment firms over the years. He is in addition to his advisor role a first vice president and manager of CIBC Wood Gundy Maritime District Offices in Nova Scotia, P.E.I. and southeastern New Brunswick.


Organizations: CIBC Wood Gundy

Geographic location: Nova Scotia, New Brunswick

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