“The small business person must plan ahead… Otherwise, the business will die when they do.” John Bulloch, Founder and former Chairman of the Board of Canadian Federation of Independent Business

Owners have a great responsibility to ensure they plan ahead, perhaps more than they think!

A business that dies:

  • does not maintain jobs for their employees to support them and their families financially
  • may affect employment for employees and families of their suppliers and of businesses dependent on them     
  • reduces or eliminates any realizable business value for the business owner

Many business owners don’t get around to planning ahead. The reasons of too busy and procrastination are used too often. In the end they are just excuses. It’s really about not making it a priority.

Putting off this important planning can have significant consequences to the business owner, their family and all others mentioned above.

Some businesses may not have the financial resources to implement some of the best practice solutions. However, a great many do. 

Canadians who engage in financial planning report:

  • Feel MORE ON TRACK with their financial affairs
  • Feel MORE CONFIDENT that they can deal with life’s challenges
  • ABLE TO INDULGE in vacations and other luxuries
  • Feel ON TRACK to retire when they want to
  • MORE CONFIDENT they will not run out of money in retirement

Below are some of the questions owners should address. While I’m not proposing more red tape for business owners, I’m sure requiring them to file proof they have done so along with their income tax return would be a great motivator for them.       

  • What happens to my business if I die, become disabled or sick?
  • Would I and my family be financially secure from the business and other investments if I die, became disabled or sick after paying business debts?
  • Is there liquidity to pay out debts and any shareholder loans in event of death, disability and sickness?
  • Does my business have any significant business debts? Did I personally guarantee them? Does my family know? Did I insure these debts in event of death, disability and critical illness? Am I taking advantage of return of premium feature if I never claim?
  • What am I doing to protect myself and business from potential claims from creditors?
  • In addition to me, have I protected my key people against death, disability and critical illness?   
  • Do I have a plan to attract, reward and retain my best employees?   
  • Do I have a benefit plan to tax effectively attract and keep good employees?
  • How competitive is my benefit plan in the marketplace?   
  • What new benefit plan designs have I investigated to increase return on investment and reduce costs?
  • Do I want my partner’s wife, husband, family to be my new partner if my partner dies or becomes disabled?
  • Do I have a shareholder’s agreement? Is it signed? What does it say? Is it missing any pages? When did I last review and update it? What does it say in regard to death? Disability? Critical illness? Retirement? Shot-gun? Divorce?
  • What is the current estimated fair market value of my business(es)? How much has it increased since my last shareholders agreement? How much will my family not get because it is not up to date?
  • Am I bonusing down to the small business limit or retaining excess corporate profits? Why?      
  • How do I deal with my retained earnings in a tax-effective manner?       
  • Do I have any adjusted aggregate investment income (passive investments) issues?
  • Do I have a plan to get my money out of my business tax efficiently?
  • Do I have enough to retire?
  • Will I outlive my money?
  • How is my estate to be divided? 
  • Do I want to leave assets to anyone other than spouse and children?
  • How do I treat my children fairly, but not necessarily equally in my estate plan?
  • What is my business continuation plan? Succession plan?
  • What strategies am I using in my business to effectively, efficiently, expediently and privately transfer and extract my wealth for me and my family?

One last point business owners. It’s not your accountant’s role to quarterback these issues.

Make planning ahead a priority today! For those looking for assistance with these issues or other connection with us. If you could do it on your own you would have done it already.

Dave Otto is a Certified Financial Planner (CFP), a Chartered Life Underwriter (CLU), a Chartered Financial Consultant (CH.F.C.), Business Owner Specialist Program graduate and an Elder Planning Counselor (EPC) that make him an authority in financial planning that encompasses cash flow management, income, health & wealth protection, wealth accumulation, education, retirement, investment strategies, tax, wealth transfer, estate, 50+, business insurance, employee benefit and pension planning. He holds an Honors Bachelor of Business Administration (B.B.A.) from Wilfrid Laurier University. He is a multi-year qualifying and Court of the Table member of the Million Dollar Round Table. He is also the upcoming author of “The Book on Financial Planning”. DAVE OTTO FINANCIAL GROUP INC. also partners with business owners of small and medium-size businesses across Midwestern Ontario providing customized solutions to corporate financial security planning. 

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