Passing your business to your children or family in Canada

Keeping a business in the family can be very rewarding. It also mixes money and family feelings, so it goes best with early, honest planning.

Start with the conversation

Before any numbers, ask: does your son, daughter or relative truly want to run the business, and are they ready? Not every family member wants it, and that's all right. Talk about timing, roles, and what you'd like your own life to look like after you step back.

Fair to everyone

If one child takes over the business and others don't, think about how to treat everyone fairly. Some families balance it through the will, life insurance, or the way the price is paid. A lawyer can help you put your wishes in writing.

Agreeing a price

Even within a family, it helps to know what the business is worth. Get a rough value estimate, then ask your accountant. Selling well below fair value can have tax effects, so don't settle on a number before getting advice.

Getting paid

Family buyers often can't pay the whole price at once. Many owners are paid over time through a written agreement, sometimes with a bank loan for part of it. See vendor take-back financing. Put it in writing, even with family. It protects the relationship.

Tax rules are different for family

Canada changed the rules for passing a family business to children or grandchildren in 2021, and added conditions from 2024. Depending on your situation, these rules, the lifetime capital gains exemption and the timing of payments can make a big difference. Read taxes when you sell a small business for the basics, and plan this with your accountant well ahead.

Hand over gradually

• Give your successor real responsibility a year or two before the sale.
• Introduce them to key customers, suppliers and your banker.
• Write down how the business runs, so knowledge isn't only in your head.
• Agree how long you'll stay on, and in what role, after the handover.

Thinking about a long-time employee instead? Read how to sell to an employee or manager. For the bigger picture, see succession planning for small business owners.