Family Business and The Art of Letting Go

Family Business Welsh LawElsewhere on this website you’ve seen articles relative to the succession issues of a family business.

Recently (Thursday, October 11, 2012), the Toronto Star featured an article addressing small businesses. The caption was “The Art of Letting Go”. The article reported that the Bank of Montreal, in a recent study, found 37% of small business owners having some form of a succession plan, up from just 15% just 2 years ago.

Essentially, there seem to be 3 alternatives: selling the business to a family member; selling to employees of the business; or potentially selling to third parties, whether competitors or an investor.

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Business Names, Trademarks and Domain Names

Welsh Law Business NamesThis is a very thorny and grey area in the age of electronic technology. Unfortunately there are those who stand on the sidelines awaiting the expiry of a domain name registration or a business name and snap up the opportunity with the intention of selling back to the originator their own intellectual property.

This is an area as well where business persons should definitely seek out the assistance of an intellectual property lawyer to protect what is probably their most valuable asset: Their Brand.

Not infrequently, but very discouragingly, business persons have found that their trade-mark registration was of little assistance upon learning of the registration of a domain name with the identical characteristics. Similarly, aggressive domain name registrants in foreign countries watch carefully for the expiry of a registration of a corporation in Canada and claim they have clients seeking domain name registrations in a foreign country with identical characteristics. The foreign country domain name registrars seek the opportunity to be the registrant of the Canadian company’s domain name.

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Estate Freeze

Peter R Welsh Law Estate FreezeWhat is an Estate Freeze? In short, it is a technique to limit and defer capital gains tax on a shareholder. As we know, upon the sale of shares of a corporation giving rise to a capital gain ( which is the difference between the acquisition cost or the “Adjusted Cost Base” and the selling price), one half of the difference is added to the other income of the seller in the year of sale (there are some income tax provisions which soften the capital gains tax exposure, but for the purposes of this brief introduction, we are ignoring those alternatives).

Upon the death of a shareholder, there is a deemed disposition (or sale) of shares and the capital gains is then calculated and included in the terminal year income tax return of the deceased shareholder. It is advantageous to a shareholder to defer or delay the calculation and payment of that capital gains tax or, better still, to limit its potential growth.

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