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- Small Business Owners > Business Transition Strategies

Business - HOLDCO and Family Trusts

As your business matures, the successful small business owner should be thinking about tax efficient wealth accumulation, succession and estate planning goals and strategies. Creation of a Holding Company or Family Trust may facilitate this planning.

Holding Companies (HOLDCOs) provide for many tax planning, estate planning and creditor protection strategies. Holding Companies will often be created to facilitate an Estate Freeze whereby the capital gains tax on the future growth of the Company will be deferred allowing the small business owner to plan for a known tax liability that will have to be dealt with by their estate. Ideally, the known liability can then be funded using insurance strategies so as not to disrupt the ongoing affairs of the Company as it transitions to family or third party ownership.

Holding Companies are also often created to receive excess cash flow that is over and above that required by the Operating Company (OPCO) for ongoing operations. Moving this excess cash to a HOLDCO serves two purposes ... it maintains the qualified small business corporation status of OPCO thereby maintaining its eligibility for the $750,000 lifetime capital gains exemption and allows HOLDCO to implement investment and insurance strategies to grow wealth in HOLDCO to support the small business owner's retirement or to provide for intergenerational wealth transfer to his or her children.

Similarly Family Trusts can be used for many of the same strategies. However, there are significant tax planning differences to consider when employing a Trust structure.

At the end of the day, utilizing HOLDCOs and Trusts is all about protecting your hard earned wealth, minimizing taxes, efficiently funding your retirement and meeting your goals for wealth transfer to your children to either fund the family business transition or to provide for their personal needs.

Many small business owners find these strategies too complex. They struggle with seeing the value. They either forgo the opportunity or blindly hope that their accountant and lawyer are looking after their best interests. At Transitions Wealth Strategies, we understand this reservation and make it our first priority to simplify these strategies into practical terms you understand so that you can clearly see how these strategies will benefit your business.

Don't miss out on this opportunity. We will show you the way.

Contact Transitions Wealth

Contact Transitions Wealth

For more information please contact us   705.888.2765