Half of Baby Boomer business owners have no exit plan
A new study has found that over $1.5 trillion in business assets will be in play over the next decade, as nearly three-quarters of small business owners intend to exit their business.
According to the Canadian Federation of Independent Business (CFIB), the vast majority of business owners intend to sell or transfer their business to help fund their retirement, although only a fraction of them have a succession plan in place.
The CIFB found that 51 per cent of small business owners have no plan at all, while a mere 8 per cent of respondents have a formal written plan and 41 per cent have an informal plan.
Nearly half of business owners said that they 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.
”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.”
CFIB is urging the Canadian 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. In addition, CFIB, which has 110,000 members across every industry and region, is asking the government to treat the taxation of sales to family members in the same way that sales to third parties are treated.
Pohlmann said, ”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 advisors and financial institutions need to work together to encourage business succession and facilitate business transfers.”
Pohlmann presented the results at the Conference Board of Canada’s Entrepreneur & Investor Immigration Summit in Ottawa on November 28.