The issues that must be factored into relevance before deciding that the family succession is the best way for your business include the following:

Skills

It is interesting to encourage one or more children to follow in your footsteps. But if it looks like your children won’t eventually have the skills to run the business, it is probably better to look outside the family.

Timing

If you bring your children into the business too early, they may lack the broader work experience that many business owners bring to their business when they start the enterprise.

This might make you reluctant to place your children in a position of responsibility leading to slower development and possible job frustration. If you delay their entry into the business too long, you run the risk of your children seeking and developing another career opportunity that they won’t want to leave.

While the right time to make the transition will vary by business, try to ensure that the end of your children’s learning curve coincides more or less with your ultimate departure from the business.

Focus on Management Responsibility

One of the greatest challenges in passing a business to your children is giving up control over some or the entire decision-making. Your children won’t be on the business long if they don’t have the authority to make the decisions they feel appropriate.

You may not agree with the decisions that are made, but once your children have enough business experience to handle significant business responsibilities, they should be given the management responsibility and the opportunity to carry out their plans.

Professional Advice

Your best advice on family succession issues comes from outside of the family. The Board of directors, accountants, and financial advisors can help you identify any family succession problems and help ensure that sound business decisions take priority over any personal family issues that may arise.

Hiring a specialized external firm to facilitate the overall process could be the most valuable decision for the future.

Your Business And Retirement

If you are relying on the value of your business to fund all or a major part of your retirement income, your business succession plan must include an assessment of what your retirement income needs will be, the steps that are needed to help ensure your retirement capital is protected and the strategy to unlock the value of your business to meet your retirement income needs.

Addressing these retirement issues well in advance of your expected departure from the business will help ensure you have the retirement income and security you need in your post-business years.

Income Strategies For Retirement

These include the following:

Retirement Plan Alternatives

Registered Retirement Savings Plan(RRSP) or a Company Registered Pension Plan (RPP) is a choice that could be made that will make provision for your retirement.

Retirement Compensation Arrangement (RCA)

This is a plan or an arrangement under which an employer makes contributions to a custodian who holds the funds in trust. The funds are eventually distributed to the beneficiary (employee) on retirement, the loss of employment, or substantial change in the services of the employee.

Individual Pension Plan (IPP)

For individuals over age 40, a large contribution can be made to an individual pension plan in addition to a company retirement pension plan.

Dividends

As a shareholder, you can receive dividends based on the profits of the company. It is advisable to reorganize the company’s shares so that you own a different class of shares from the other shareholders.
This allows a different dividend to be allocated to each class of shares.

Serial Share Redemption

Your company could buy back a portion of your shares each year. This is called share redemption. This is done together with an estate freeze. It converts common shares to fixed valued preferred shares.

The new owners of the business will subscribe to new shares to share in the future growth of the company. The preferred shares may include provisions for dividends and multiple voting rights.

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