As a business owner, your hard work and dedication have built something valuable — not just for you but for your family and possibly your employees too. But have you thought about what happens to your business if you’re no longer around? That’s where Wills for Business Owners comes in.
A Will ensures that your wishes are carried out when it comes to your assets, including your business. Without one, the law decides how your assets are divided, which can lead to family disputes, business complications, and even tax burdens. In Ontario, having a Will is essential for business owners to protect both their families and their companies.
In this guide, we’ll walk through seven key steps to writing a Will that safeguards your business and your loved ones.
Step 1: Inventory Your Assets (Business and Personal)
The first step in writing a Will for a Business Owner is understanding what you own. This includes both personal and business assets. For business owners, this step can be more complicated than for someone who only has personal assets.
- Personal assets: These include your home, bank accounts, investments, vehicles, personal belongings, and life insurance policies.
- Business assets: This covers shares in your company, business bank accounts, intellectual property, business equipment, real estate owned by the business, and even accounts receivable (money owed to your business).
Listing all your assets gives you a clear picture of what needs to be distributed after your death. It also helps ensure that no asset is overlooked, which can happen when business and personal property are intertwined.
Step 2: Choose Beneficiaries and Alternate Beneficiaries
Once you have an inventory of your assets, the next step is deciding who gets what. This step can be more complicated for business owners because you have to think about both personal and business interests.
- Beneficiaries for personal assets: These are usually family members, such as a spouse, children, or other relatives.
- Beneficiaries for business assets: You may want to leave the business to a family member, business partner, or even a trusted employee. If the business is being sold after your death, the proceeds can be left to your chosen beneficiaries.
It’s also a good idea to name alternate beneficiaries. These are the people who will receive your assets if the primary beneficiary cannot. For example, if your spouse is the main beneficiary and they pass away before you, having alternates ensures your assets are still distributed according to your wishes.
Step 3: Name an Executor
The executor is the person responsible for ensuring your Will is followed. For business owners, this is a critical role, as the executor will be managing not only your personal assets but also the business side of things.
- Choose wisely: The executor should be someone you trust completely. They need to be responsible, organized, and able to handle complex tasks like selling assets, paying taxes, and dealing with legal matters.
- Consider business experience: If your business is large or valuable, consider appointing an experienced executor. This could be a trusted partner or a professional.
- Backup executor: Just like with beneficiaries, it’s a good idea to name a backup executor in case your first choice can’t fulfill their duties.
Step 4: Plan for Business Succession
One of the most important parts of Wills for business owners is planning for what happens to your business. There are several ways to handle this:
- Transfer the business to a family member: A family member running the business can be a great option if they’re prepared. You’ll need to outline the details in your Will to make sure the transition is smooth.
- Sell the business: If no one in your family or business circle is prepared to take over, you may choose to sell the business. In your Will, you can specify who will handle the sale and how the proceeds will be distributed.
- Appoint a successor: If you have a key employee or business partner who is capable of running the business, you can appoint them as your successor.
No matter which option you choose, make sure to get legal and financial advice on the tax implications. Selling or transferring a business can have significant tax consequences, especially in Ontario.
Step 5: Account for Taxes and Debts
Death doesn’t erase financial obligations. You need to consider both personal and business taxes, along with any outstanding debts, that need to be settled. Planning for these in your Will is essential to protect your beneficiaries from unexpected financial burdens.
- Personal taxes: In Ontario, the government may impose probate and capital gains taxes on your estate.
- Business taxes: If you own a business, there may be additional taxes due, especially if you’re passing on company shares. At the same time, you may be able to utilize Lifetime Capital Gains Exemption (LCGE) on death, if available and the criteria is met. You’ll also need to consider any outstanding business debts.
- Plan for tax efficiency: Some business owners use strategies like estate freezes to minimize tax liability when passing on business assets. This can save your heirs a significant amount of money and preserve the value of your business.
Addressing taxes and debts in your Will prevents your heirs from facing financial surprises.
Step 6: Update Your Will Regularly
Your Will isn’t something you write once and forget about. Life changes, and so should your Will. Business owners especially need to update their Wills regularly as their businesses grow, or as their family situations change.
- When to update: Update your Will after major life events like marriage, divorce, the birth of a child, or the acquisition of significant assets (like a new business).
- Business changes: Any new partners, business expansion, or ownership changes must be reflected in your Will.
Regular updates keep your Will aligned with your current situation and wishes.
Step 7: Seek Professional Help
Writing a Will, especially for a business owner, isn’t a simple task. While it’s possible to use a Will kit or template, the complexities involved in managing both personal and business assets often require professional advice.
- Legal advice: A lawyer who specializes in estate planning can help ensure your Will is legally sound meets the specific needs of your business, as well as adheres to the Wills legislation applicable to your province.
- Tax advice: A tax advisor on our team can help you minimize the tax burden on your estate and ensure your beneficiaries receive the maximum value from your assets.
- Business succession planning: Professionals can also help with the finer details of transferring or selling your business, ensuring a smooth transition for your family or employees.
Conclusion
As a business owner, your estate planning needs are more complex than most. By following these seven steps on creating Wills for Business Owners protects your business, your family, and your legacy. Don’t wait—start planning today to ensure your hard work continues to benefit your loved ones.
If you need help navigating the complexities of writing a Will, especially when it comes to business succession and tax planning, reach out to us. Our team, working alongside your lawyer, can guide you through every step of the process and ensure your Will is set up to protect what matters most.