Selling your business, transferring it on to your family members or others, or closing for good (either by dissolution or bankruptcy), triggers a number of financial events that you’ll need to resolve.
An accountant and a lawyer can assist you with most aspects of exiting your business, and should be consulted before you make any decisions.
Selling Your Business
When selling, enlist the help of an accountant, broker, or business valuator to ensure your business is properly priced. These professionals can help you get the best price possible for your business, without leaving any money on the table.
You can also use market research to understand and prove the value your company might bring when you put it up for sale.
If you are incorporated, you can sell all or part of your business through a share transfer, or by going public. You can raise capital through issuing an Initial Public Offering (IPO), which is selling shares to the public and your corporation changes its status from a private to a public company. If you’re interested in this option, it’s highly recommended that you seek legal counsel. If you don’t have a lawyer, you can contact the B.C. Lawyer Referral service.
If you decide to transfer your business to family members, friends, or other parties, the financial implications will depend on your business structure and the method you choose to transfer your ownership.
The common ways to transfer ownership of a company to family members include:
- Through joint ownership, either using a share transfer (if the business is incorporated) or using a partnership (if the business is an unlimited company)
- Through a sale, wherein your heirs would purchase the business outright, or over a period of time
- Through your will or living trust
- Through gifting, wherein you would give parts of your business to your heirs gradually over several years
Due to the complexities of succession, we recommend that you draft a formal succession plan for a smooth transition, and that you retain the services of a lawyer and an accountant to help you sort through the legal and tax implications.
Closing Your Business
You might need to shut down your business permanently—even if you don’t want to—due to extenuating circumstances, such as a personal or family crisis, health issues, faltering revenues, or bankruptcy.
In this case, the dissolution of your business might result in financial hardship.
When bankruptcy is your only option, it might feel like failure, but it can also provide relief. When you’re in bankruptcy, your financial obligations can diminish because no unsecured creditor can garnishee your wages or initiate any other collection action against you.
However, you will be required to pay:
- Any outstanding taxes and payroll remittances to Canada Revenue Agency
- Any wages or salaries owed to your employees
- Any secured debt. Your secured creditors can repossess any property or collateral you had secured against a loan, such as your car or house.