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Transition Series

Freezing value = saving long-term

Tax planning is complicated. As a business owner, did you know that establishing the appropriate tax structures can lead you to pay only once on that income  – and the minimal amount necessary at that?

business people at the table discussing transition planning

Let’s say that you are the sole owner of the business where the common shares are worth $8,000,000 today. You want to implement a plan to save tax on the capital gains when you sell the business a number of years down the road. This can be accomplished by changing your common (growth) shares into new preference shares that have a “frozen value” of $8,000,000. These preference shares can be voting shares, so that you still have voting control of the company.  New common shares can now be issued to your spouse and (let’s assume) two children, or to a trust for either or both of these parties.

Initially, these new common shares will have no value. However, over time, as the value of the business continues to increase, all of the growth in value will go to these new common shares, as you “froze” the value of your shares when you exchanged them for preference shares. If, for example, the business grows to a value of $32,000,000 prior to sale, then the value of the shares of all four parties is $8,000,000 each – your “frozen” preference shares, and the growth of the common shares to a value of $24,000,000, which is then split between your spouse and two children.

How we can help you

When we say our approach is holistic, we mean it. It’s centered around you. Not just your company; not only your legacy, you. We advise business owners and their families both personally and professionally. Our professionals, (from wealth management, valuations, taxation and estates, to various other service lines) work collaboratively to provide advice that makes the most sense for you and your objectives – because we know that your work affects your personal life, and vice versa – they are of equal importance. Through early, comprehensive planning, our professionals assess every situation and present options to help you make informed, strategic decisions to make the most out of your unique situation.

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