Planning an exit strategy is crucial for business owners because it ensures a smooth transition when they decide to step away from their business. It allows for the orderly transfer of ownership, minimizes tax implications, and maximizes the value of the business, whether through a sale, succession, or other exit options. Without a well-thought-out exit strategy, business owners risk facing unexpected challenges that could negatively impact their financial security and the future of the business.
During the exit planning phase, two key types of taxes to be aware of are income tax and capital gains tax. Income tax considerations include managing taxable income leading up to the exit and understanding the tax implications of any payments received during the transition. Capital gains tax is particularly important for owners looking to sell their business, as it applies to the profit earned from the sale of their company’s assets or shares. There are also opportunities to reduce taxes by utilizing a shareholder’s Lifetime Capital Gains Exemption. Proper tax planning can help minimize the tax burden and maximize the financial benefits of the exit strategy.
Our Business Succession Tax Planning Services
At Achen Henderson CPAs, we understand the importance of a tax-efficient succession or exit strategy for your business. Our team is dedicated to working closely with you to ensure that your transition is not only smooth but also optimized for tax efficiency. Here’s how we can help:
- Comprehensive Tax Planning: We will conduct a thorough review of your current tax situation and develop a customized tax plan tailored to your specific succession or exit strategy.
- Business Valuation: Our team can help you accurately value your business, taking into account various factors that impact its worth, such as assets, liabilities, cash flow, and market conditions.
- Structuring Advice: We provide guidance on the optimal structure for your succession or exit, considering tax implications, legal requirements, and your long-term goals.
- Tax Minimization Strategies: We will identify opportunities to minimize taxes associated with your succession or exit, including strategies for managing capital gains tax, income tax, and other relevant taxes.
- Estate Planning Integration: If your succession or exit involves estate planning, we can seamlessly integrate tax-efficient strategies into your overall estate plan.
- Transaction Support: Our team can provide support throughout the transaction process, including due diligence, negotiation support, and tax compliance to ensure a tax-efficient outcome.
- Ongoing Tax Advisory: Even after your succession or exit is complete, we continue to provide ongoing tax advisory services to help you navigate any tax-related issues that may arise.
Managing Tax on Sale of Business
When it comes to selling your business, maximizing its value and minimizing tax implications are crucial considerations. At Achen Henderson CPAs, we offer comprehensive services to ensure that your business sale is tax-efficient and financially advantageous. Here’s how we can help:
- Business Sale Readiness Assessment: We start by assessing the readiness of your business for sale, identifying areas that may impact its value and tax implications. This assessment helps us develop a tailored plan for the sale process.
- Tax Structuring: Our team will work with you to develop a tax-efficient structure for the sale, considering factors such as capital gains tax, income tax, and other taxes that may apply. We aim to minimize your tax liabilities while maximizing the after-tax proceeds from the sale.
- Transaction Advisory: Throughout the sale process, we provide strategic advisory services, including negotiation support, deal structuring advice, and risk assessment to ensure a successful and tax-efficient transaction.
- Valuation Services: We offer business valuation services to help you determine the fair market value of your business, providing you with a realistic understanding of its worth in the current market.
- Due Diligence Support: Our team can assist with due diligence processes, helping you prepare the necessary financial documentation and ensuring that all tax-related aspects are thoroughly reviewed.
- Post-Sale Tax Planning: After the sale, we continue to work with you on post-sale tax planning, helping you manage the tax implications of the transaction and optimize your tax position for the future.
- Post-Sale Tax Compliance: After the sale, we will ensure that you have reported the transaction property to the CRA, reducing your risks of getting something wrong and triggering an audit.
Share Sales vs Asset Sales
When considering a business sale, whether through a share sale or an asset sale, tax planning plays a crucial role in determining the most advantageous approach. Here’s how our team at Achen Henderson CPAs approaches tax planning for each type of sale:
Share Sales vs. Asset Sales: Tax Planning Differences
Share Sales: When selling shares of a business, the focus is on the transfer of ownership in the company. From a tax perspective, the seller’s cost base in the shares is subtracted from the proceeds of the sale to determine the capital gain or loss. The tax implications for the seller are primarily based on capital gains tax rates, which may offer tax advantages such as the lifetime capital gains exemption for qualified small business shares.
Asset Sales: In an asset sale, the business sells its individual assets, such as equipment, inventory, and goodwill. From a tax perspective, the seller’s cost base in each asset is deducted from the proceeds of the sale to determine the capital gain or loss for each asset. Asset sales can result in different tax consequences compared to share sales, as certain assets may be eligible for specific tax treatments or deductions.
Tax Planning Options for Share Sales
Structuring Considerations: We analyze the structure of the share sale to determine the most tax-efficient approach, considering factors such as the distribution of sale proceeds among shareholders and the use of available tax planning strategies.
Capital Gains Exemption: For eligible small business owners, we explore opportunities to maximize the use of the lifetime capital gains exemption, which allows for a significant portion of the capital gain from the sale of qualified shares to be tax-free.
Tax Planning Options for Asset Sales
Asset Allocation: We review the allocation of the sale proceeds among different types of assets to optimize tax outcomes, considering the tax treatment of each asset class and any available deductions or allowances.
Depreciation Recapture: For depreciable assets, we assess the impact of depreciation recapture on the tax liability, taking into account the tax consequences of selling assets that have been previously depreciated.
Wills & Business Exit Planning
At Achen Henderson CPAs, we offer comprehensive services for individuals and business owners looking to create or update their wills and plan for the continuation of their businesses in the event of their incapacity or death, otherwise known as estate planning. Our services include:
Creating Your First Will:
We guide you through the process of creating your first will, ensuring that it accurately reflects your wishes regarding the distribution of your assets, the appointment of guardians for minor children, and other important matters.
Our team considers tax implications when drafting your will to help minimize potential tax burdens on your estate and beneficiaries.
Updating or Amending an Existing Will:
If you have an existing will that needs to be updated or amended due to changes in your life circumstances or estate planning goals, we can assist you in making the necessary revisions.
We review your existing will and assess any changes that may be needed, such as updating beneficiaries, addressing new assets, or modifying estate distribution plans. Our goal is to ensure that your will remains current and aligned with your wishes while optimizing tax efficiency.
Tax-Efficient Will Planning:
Our team takes a tax-efficient approach to will planning, considering strategies to minimize estate taxes, probate fees, and other potential tax liabilities.
We explore options such as trusts, gifting strategies, and charitable giving to help you achieve your estate planning goals while managing tax implications. By integrating tax-efficient strategies into your will, we aim to preserve your wealth for future generations and minimize the tax burden on your estate.
Experienced, Thorough, Flexible
With a combined total of over 50 years of experience in tax planning, our team at Achen Henderson CPA brings a wealth of expertise to assist you with your exit and succession planning needs. We have worked with businesses of various sizes, from small family-owned enterprises to large corporations, across a diverse range of industries. Our experience includes:
- Developing tax-efficient exit strategies for businesses looking to transition ownership or sell their assets.
- Assisting with succession planning, including the transfer of ownership to family members or key employees.
- Advising on the tax implications of business sales, mergers, and acquisitions.
- Providing comprehensive tax planning services tailored to the unique needs of each client.
Our network of professionals consists of diverse skill sets, including tax specialists, financial advisors, lawyers, and business consultants. This diversity allows us to offer a broad range of services and perspectives, ensuring we can address all aspects of your exit and succession planning needs. Whether you are a small business owner or a corporate executive, you can rely on our team to provide expert guidance and support to help you achieve your goals efficiently and effectively.GET STARTED