MortgageBroker mbabc.ca spring 2015 | 33
familytrusts
Family
Financials
AT SOME POINT, as a Canadian
business owner, you will face decisions about
estate or succession planning and may want to
consider the benefi ts of income splitting. You
will need to determine the best way to address
your corporate structure to provide for the
future while protecting the company you have
worked so hard to build.
What might seem like an obvious
solution is to simply have family members
purchase shares in your corporation in
their personal names. However, adding
new shareholders is not something to be
taken lightly. Before going ahead, consider
the following:
• What are the specifi c rights and restrictions
attached to the shares?
• What are the legal rights of shareholders
generally?
• Are they ever going to actually participate
in the growth of your business?
• What about the debt level of that person?
• Is this person a minor?
• If/when you sell your business, who do you
want to be entitled to the proceeds?
• What is the family situation of that person
(i.e. is he/she single, married or divorced)?
• What is your family situation? Do you
have other children who may be upset over
your decision?
As you work through these questions,
you may identify some other concerns. It is
important to recognize that the addition of a
personal shareholder may expose you and your
business to a lot of unwanted risk.
Fortunately, there is another option; one
that allows you to bring family on board
without risking it all. You can mitigate some
of that risk through the establishment of a
discretionary family trust, which is used to
purchase company shares instead.
A trust is a legal relationship where a
person (the settlor) transfers a specifi c item
of property to a trustee. e trustee then
purchases shares in a corporation and holds
Consider a family trust as a shareholder
of your privately owned business
BY MAGDA GRALA
