Over $1.5 trillion in business assets will be in play over the next decade as 72 per cent of small business owners intend to exit their business, according to a new survey released on Wednesday by the Canadian Federation of Independent Business.
“Successful business sales or transfers can save or even create jobs, keep local communities prosperous and continue to grow Canada’s economy. With many baby boomers planning to retire in the coming years, business succession is a major concern. We need to do everything possible to ease the transition,” said Corinne Pohlmann, CFIB senior vice-president of national affairs.
“Ultimately, a well planned and executed transition is not only critical for the success of the business, but also for Canada’s ongoing competitiveness and economic prosperity.”
According to the survey:
- 81 per cent of business owners intend to sell or transfer their business to retire, although only a fraction of them have started planning for their departure;
- 51 per cent have no plan at all, eight per cent of respondents have a formal written plan and 41 per cent have an informal plan;
- 48 per cent plan to sell to third parties, while others prefer to pass their business on to one or more family members, whether through a sale (25 per cent) or a transfer (21 per cent) such as an inheritance;
- 56 per cent said finding a suitable successor or buyer is the main hurdle to succession.
CFIB said it’s urging the government to raise the lifetime capital gains exemption threshold to $1 million for all small and medium-sized businesses. Currently, only fishers and farmers have a lifetime capital gains exemption threshold of $1 million. It is also asking that government treat the taxation of sales to family members in the same way that sales to third parties are treated.
“Under the current rules, business owners pay higher taxes when they sell to a family member than when they sell to a stranger. It doesn’t make sense. Governments, financial advisers and financial institutions need to work together to encourage business succession and facilitate business transfers,” said Pohlmann.