Proper Documentation for Business

Brothers Charles and Henry embark on a business plan of buying and renting residential properties. The first is a family residence, with 2 tenants in the basement, but all of Charles’ and Henry’s family also occupy the property as a principal residence.  Their Dad and Mom, their wives and their collective 4 children, a total of 12 people including the tenants in 1 house. 

They take title as joint tenants (which means, if Charles dies, Henry owns the whole house with no credit to Charles, his wife or kids).

Clearly fraught with risk to say nothing of the possibility of brotherly discord or Canada Revenue Agency’s interpretation of “principal residence”.

Then Charles and Henry go on to buy 6 other houses, each in a machination of joint tenancy ownership and tenancy in common (which means, contrary to joint tenancy, each of Charles and Henry has a specific direct percentage ownership in each house and death of either of them doesn’t matter – his respective interest passes to his next of kin).

What were they thinking?  Well, first, do it on the cheap, presumably.  Then, “nothing will go wrong”; it’s family after all.

Well, that’s 3 recipes for disaster.  What should have occurred?

Get it all in writing right from the beginning.  Should have had accounting and legal advice.  When the inevitable occurs, the unwind costs and the process will definitely be both a multiple (possibly 10 x’s) of the costs of proper set up, but also total family discord.

Call us before you embark.

Family Business Succession Planning

Welsh Law Family Business Succession PlanningThe majority of all businesses in Canada are family owned.  Yet, surprisingly, according to the Canadian Association of Family Enterprises, 70% of family businesses do not make it to the 2nd generation and an astonishing 90% do not make it to the 3rd generation.

The largest asset of most families is their business and an appropriate succession plan to preserve that asset is self-evident.

Family business succession planning is not restricted to the preparation of Wills or Powers of Attorney.  On the contrary, while those are part of the process to successfully transfer a family business, a much more significant issue is the identification of the appropriate Senior Management to perpetuate the family business.

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Asset Protection and Creditor Proofing

Welsh Law Asset Protection and Creditor ProofingTwo phrases with essentially the same meaning (like: passed away/dead) but with significantly different  connotations and intentions (although ‘intentions’ form a large part of the distinction, the intentions are often merely concluded rather than fully evidenced).

Nevertheless, “asset protection” is designed to be a way through various  alternative vehicles to protect an asset, sometimes forever and sometimes for a while, from the grasp of a creditor.

There are legislatively protected  vehicles in Canada into which money or assets may flow which cannot be made to cough up that money even by court order.  On the other hand there have been many instances where an asset owner transfers that asset to a third party at the time the transferor had no debts, then after the transfer, he legitimately developed creditors who seek to bring the asset to within their  legal grip.

To discuss either full or limited asset protection, please feel free to contact us on our confidential email.

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