You Bet Your Glass: October 2013
By Frank Fulton
Plan now, save later
By Frank Fulton
I recently had the good fortune to bump into an old crony, or should I
say industry colleague, since women don’t often like being referred to
as cronies, or old for that matter either.
I recently had the good fortune to bump into an old crony, or should I say industry colleague, since women don’t often like being referred to as cronies, or old for that matter either. Yvonne Parker spent many years flogging glass fabrication equipment for Salem Distributing. She is a pioneer in the biz: one of the first women in sales for Guardian Industries and InKan, and also the first female director to serve on the board of the Metro Toronto Glass Association back in the early 1990s.
We got to talking about what’s new in each other’s lives and relationships and as it happens, Yvonne’s significant other and business partner, Craig Simpson, is a financial guy with Personal Solutions Financial in Caledon Village, Ont., who specializes in business succession planning. Well, this tweaked my interest, having gone through a long and involved process during the sale of Fulton Windows to Oldcastle a few years ago, I was well aware of how beneficial having the right information in advance would have been and how planning in advance could have saved a small fortune in taxes.
A large part of our industry across the country is made up of thousands of mom and pop glass shops and sole proprietorships It is inevitable that the day will come when the parents will want to pass the business on to the kids or the owner may want to sell the company to his employees or to an outside interest.
According to Simpson, while many business owners understand their businesses are their largest asset and critical to their financial future, they become so focused on the “here and now” they fail to do any long-term wealth and business succession planning. As a result financial and tax opportunities are missed, shareholder disputes arise and the ability to provide for their retirement or families is compromised. Though many owners anticipate the disposition of their business will be a critical part of their retirement, there is typically no timeframe until it is too late. Most business owners do not have a planned exit strategy, but rather find one thrust upon them due to illness, family circumstances or economic environment.
It is critical that a business owner look at their own situation and ask “what needs to be done now and how can we improve the upside and minimize the downside?” It may be as simple as reviewing their will to make sure it reflects their current wishes. They may benefit from using something called the multiple will approach in order to reduce probate taxes. (Even though the government calls them probate fees, they are taxes).
Many business owners are entitled to capital gains exemptions, which reduces taxes payable upon the sale of the business. In order to take advantage of this the business needs to be properly structured. This needs to be done well before the actual sale takes place in order for it to be effective from a tax perspective.
Initiating or updating a shareholders agreement is always critical as part of any succession plan when you have multiple shareholders in a corporation. It can alleviate any disagreements that may arise when one shareholder is ready to sell their shares in the company.
An individual pension plan is a great tool to maximize retirement savings and ensure a steady predictable income in retirement years. This is a highly underutilized tax strategy that allows business owners an opportunity to improve their after retirement income.
We’re all up to our eyeballs keeping up with the day-to-day activities of running our businesses, but it is imperative that a business owner proactively manage their exit strategy from their business. It also takes time, so it is best to begin creating a plan long before it will be needed. If you want to investigate further, why not contact Yvonne at Yvonne@personalsolutions.ca. •
Frank Fulton is president of Fultech Fenestration Consulting. He has been in the industry for 30 years and can be reached via e-mail at firstname.lastname@example.org