Clients and friends,
As we near 2 years of these uniquely challenging times, it becomes all the more clear the importance of family-run businesses. The backbone of our economy, they provide quality jobs, encourage creativity, and build communities across our country.
As you might recall from one of our previous touch points, Bill C-208—now federal law—provides tax relief to business owners considering selling a farm or other small business to adult children or grandchildren. As with sales to unrelated third parties, business owners can now claim the proceeds from the sale of shares as capital gains, which are taxed at a lower rate. Some can even defer tax entirely, claiming the lifetime exemption. This equalization is an exciting development in the intergenerational transfer of businesses.
In the days and months since its passing, loopholes have become a concern to the Bill’s critics, leading to possible amendments, such as:
- The requirement of “legal and factual control” of a corporation by the family member to whom the business is transferred to;
- A specified amount of “reasonable time” for the business owner parent to maintain control;
- A specified degree of involvement for the child or grandchild taking over control following a transfer;
- A timeline within which a transfer must be completed;
- And other specified transfer requirements.
We’ll be sure to keep updated on any further changes as they might relate to your family business succession plan—it’s what we do best. Looking to chat further? Ready when you are.