For those that opt to close their corporation, investment and retirement strategies – such as individual pension plans or retirement compensation agreements – would also need to be shut down.. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor, visit our
Greg Tomkins, financial advisor with Tomkins Financial with Assante Capital Management Ltd. in Nanaimo, B.C., says many established business owner clients were able to come out ahead after the pandemic. But some very small business clients making less than $100,000 a year struggled during the pandemic.
Mr. Pereira says preparing to shut down a business “goes back to some fundamentals,” including building up an emergency fund of roughly six months of expenses to cushion them while they look for new employment if they don’t have a new job lined up already.. “It might make more sense not to bother with that,” he adds, noting in that case, the corporation could essentially function like another registered retirement savings plan , which clients can draw down gradually and be taxed on at, hopefully, a lower tax bracket.
For those who opt to close their corporation, investment and retirement strategies – such as individual pension plans or retirement compensation agreements – would also need to be shut down, Mr. Pereira says.Mr. Tomkins says clients who have leeway to sell their business in a few years rather than right away have the ability to maximize the tax efficiency of the transaction, but many are “too often reactive” and sell quickly when the opportunity arises.
Mr. Tomkins says that depending on the client’s longer-term goals, he may advise putting the business in a family trust before selling. Those who expect to use most of the money from the sale during their life wouldn’t see much benefit, but clients who want to pass on the majority of the value of the business to their beneficiaries can use the family trust to multiply the lifetime capital gains exemption and pass the gains on to those beneficiaries.