Estate planning for business owners is crucial if you want to maintain the value of your assets once you sell or transfer your business and when you pass away. Some of the aspects that you may have to look into include the following:
- Estate freeze : A strategy used if the value of your business has grown significantly. This would be useful before you sell the business or transfer it to other family members
- Capital gains exemption: The amount that your business can appreciate without any tax consequence. In 2016 the amount is about $825,000 per shareholder. If your gains may exceed this amount, think about adding family members as shareholders.
- Buy sell agreement: A planning strategy for a business that has several owners and protects against the death of one of them. The corporation buys life insurance on the owners. If one of them passes away the policy pays off and the proceeds can be used to buy out portion of the deceased owner.
- Creation of trusts, testamentary and inter vivo: A tax planning strategy that can divide or split the income that a business owner makes with their family provided that the family members are in a lower tax bracket. this strategy can also be used to defer capital gains taxes which can be significant upon the death of a shareholder
These are just some of the many advanced tax planning strategies that a business owner needs to look at when they are running a successful and profitable business.
