For Business Owners — Guide
Family handover, partner buyout, or sale: each has a tax architecture and a funding problem. Almost everything here works with five years of runway and fails with five weeks.
What is business succession planning?
The legal, tax and funding arrangements that move a business from you to whoever comes next — family, partners, management or a buyer — at a chosen time or an unchosen one. The tax side decides how much value survives the trip; the funding side decides whether the plan works on the day someone has to write a cheque.
Every owner exits. The only variables are when, to whom, and how much of the value makes the trip. This page maps the three exits and the machinery under them — and the theme throughout is timing: nearly every tool here works beautifully with five years of runway and poorly with five weeks.
Since the amended intergenerational transfer rules took effect, parents can sell shares to a child's corporation with genuine capital-gains treatment (and LCGE access) — but only inside a real handover: the rules define immediate (3-year) and gradual (up to 10-year) transfer paths, require the parents to actually cede control on schedule, and demand a joint election (Form T2066). The days of paper-only family sales are over; the days of legitimate ones are, honestly, better than they've ever been.
The standing tool underneath is the estate freeze: you exchange your growing common shares for fixed-value preferred shares, and new common shares — the future growth — are issued to children or a family trust. Your terminal tax bill stops growing on the day you freeze; the next generation's growth accrues to them from dollar one. Freezes are drafted with partner tax counsel, and two honest cautions attach: a trust in the structure carries the 21-year deemed disposition clock, and post-2024 GAAR expects real economic substance. A freeze also fixes the size of the insurance needed to fund your final tax bill — which is why freeze and policy are usually designed together.
A buy-sell agreement without funding is a lawsuit with good intentions. The agreement says the survivors buy; the funding decides with what. Life and disability insurance are the standard answer because the money arrives at exactly the trigger event, for premiums that are a rounding error against the obligation. Two funding architectures dominate: criss-cross (partners own policies on each other personally — simple, but premiums are after-tax personal dollars) and corporate redemption (the corporation owns the policies, receives the benefit, credits the CDA, and redeems the deceased's shares with tax-free capital dividends — usually the efficient answer, executed alongside the post-mortem planning described on the CDA page). Which fits depends on shareholdings, rates and family situations; this is a design meeting, not a form.
TOSI (2018) ended casual dividend-sprinkling to family. What survives is specific: family members who genuinely work in the business 20+ hours a week; the excluded-shares exemption (10%+ votes and value in a non-services corporation) for family 25 and older; spousal dividends once you're 65; and prescribed-rate loan arrangements. All of it is documentation-heavy, and much of it is your accountant's to implement — our job is flagging which doors are open as the succession structure is designed, since shareholdings chosen for the freeze determine who can ever use the excluded-shares exemption.
| Years before exit | What has to happen |
|---|---|
| 5+ | Freeze considered; trust settled if multiplying LCGE; insurance issued while healthy |
| 3 | QSBC purification complete and maintained; family transfer path (immediate vs gradual) chosen |
| 2 | Buy-sell agreement funded and priced; T2066 mechanics understood by all parties |
| 0 | Execution — and if death is the trigger instead of a sale, the post-mortem machinery takes over |
Fair warning
Succession planning fails socially more often than technically — the child who doesn't actually want the business, the partner who won't discuss valuation. Put the human conversations before the tax ones; we've watched perfect structures die of unspoken assumptions.
Yes — the amended intergenerational transfer rules allow genuine family sales with capital-gains treatment and LCGE access, through an immediate (3-year) or gradual (up to 10-year) handover with real transfer of control, plus a joint T2066 election filed by parent and child.
A reorganization where you exchange growing common shares for fixed-value preferred shares, while new common shares are issued to the next generation or a family trust. It caps your future tax bill at today's value and moves future growth to your successors — usually the first structural step in family succession.
Usually with life (and often disability) insurance, so funding arrives exactly at the trigger event. The two main designs are criss-cross personal ownership and corporate ownership with share redemption through the Capital Dividend Account — the corporate route is typically more tax-efficient but must be designed with post-mortem rules in mind.
Only within the TOSI exceptions: family working 20+ hours weekly in the business, adults 25+ holding 10%+ of votes and value in a non-services corporation, spousal dividends after 65, or prescribed-rate loan income. Everything else is taxed at the top rate.
Book a Tax Diagnostic
The first conversation is free — your situation, our method, and whether we fit. Complex files quote a planning fee up front: you'll know before we start.
// the only variable in this plan that gets more expensive every year is your age