Watch the fourth part of our webinar series: IT’S TIME – Minimizing Your Tax Bill with Rick Gendemann. Rick is one of BC’s top tax advisors – helping guide business owners through these interesting times.
In this presentation, Rick shared his experience working with business owners through a global pandemic and what you should be aware of during the sale of your business to minimize your tax bill.
View the full webinar below:
Key Points by Rick Gendemann
Tax Treatment of Income Streams:
Under our current personal income tax regime in BC, certain types of income are subject to taxes at different effective rates.
Regular income (employment, interest) is taxable at an individual’s effective marginal tax rate, with the top tax rate in BC at 53.5%.
Dividends are subject to lower rates of personal taxes with top rates in BC being 36.5% on eligible dividends and 48.9% on non-eligible dividends.
Capital gains are subject to the lowest rates of personal taxes with a top rate in BC of 26.8%.
Capital Gain Tax Planning Opportunities:
With respect to the recognition of capital gains on the sale of shares in a qualified small business corporation, each shareholder has access to a lifetime capital gains exemption claim which is approximately $883,000 per person.
This lifetime exemption can effectively allow shareholders to sell their qualifying small business corporation shares and save personal taxes of about $236,000 at the top personal tax rate in BC.
Planning to structure future sale proceeds as capital gains can significantly reduce your personal tax costs.
If you are selling shares of a qualified small business corporation, proper planning to increase access to multiple capital gain exemption claims amongst the family group can further enhance potential tax savings.
Structuring a Future Sale of Your Business:
The future sale of the business will likely involve one of the following options:
Sale to an outside party
Sale to management group
Sale or transition to the next generation
Sale of the assets and wind-down of the business
Each of these options will have different tax implications and planning considerations to be addressed
Further, the terms and conditions of the sale will be unique to each option with respect to the monetization of the sale proceeds to the owners
Bottom line: You need to consider well in advance who will be the potential buyer of your business so you can plan the transition accordingly.
Rick Gendemann, CPA, CA – Lead Partner – Business Transition, Business Advisory, Tax Planning, Family Wealth Continuity
Rick is committed to helping business families create a roadmap for successfully transferring their entrepreneurship and economic wealth across multiple family generations. Rick works extensively with family enterprises, providing owners with business advisory and business transition planning services. Rick is a graduate of the Institute of Family Enterprise Advisors program, which provides a comprehensive education in knowledge and best practices in family enterprise advising. He works closely with business owners in helping them develop and implement strategies to enhance the future. His experience in working with family enterprises spans over 30 years. Rick is also a frequent presenter on business advisory and business transition matters and has authored numerous articles on these matters.
Anchor Pacific Investment Management Corp. (“Anchor Pacific”) is a Vancouver, BC-based portfolio management firm, which leverages process, technology, and infrastructure to democratize the process of managing endowment and pension style investment portfolios to deliver innovative, high-touch, and transparent investment programs across the full spectrum of asset owners and investment consumers.