Tag: family business

15 Apr

Family Business Valuation Considerations

Nick Esterbauer Continuing Legal Education, Litigation Tags: , , , 0 Comments

Earlier this week, I had the pleasure of hosting the Family Dispute Resolution Institute of Ontario’s webinar on “Special Considerations When Valuing a Family-Owned Business” featuring Tom Strezos, Adam Guyatt, and Claudio Martellacci of Grewal Guyatt LLP.  A link to their article on this topic is available here.

In the estates context, we often encounter situations where a family business needs to be valued after death.  While we will often defer to experts for assistance in this regard, it can be helpful to keep in mind some considerations unique to family businesses that might affect valuation.  These may include the following:

  • Payroll considerations: including whether any family members are on the business payroll and paid compensation greater or less than standard market rates;
  • Related party transactions: for example, whether a family member owns a supply company and that relationship may increase or decrease business expenses and impact its value upon any change in that relationship;
  • Non-operating assets or liabilities: whether there are investments in assets that do not impact cash flow directly or liabilities payable to family members;
  • Internal controls and governance: such as whether additional staffing costs would need to be considered as part of the valuation to reflect the situation if certain family members were no longer involved in the operations of the business;
  • Transferability of goodwill and discounts for reliance on certain individuals: some family businesses may have limited assets beyond goodwill and it can be worthwhile to consider how a departing family members (such as a divorced spouse or incapable or deceased family member) may impact value going forward.

These considerations may be relevant to probate applications, estate administration, and certainly where there are claims against an estate or specifically against a family business.

Also discussed during yesterday’s webinar was the idea of business valuation expert hot-tubbing, whether formally at trial or otherwise working together in a similar manner to try and determine a reasonable value of a company for the purposes of settlement discussions.  This is an Interesting concept that may work well for some estate matters where valuation issues are at play.

A recording of this week’s FDRIO webinar is available to FDRIO members free of charge and will be replayed at a fee for non-members later this month.  More information is available at fdrio.ca.

Thank you for reading.

Nick Esterbauer

31 May

Succession Planning for the Family Business

Hull & Hull LLP Estate Planning Tags: , , 0 Comments

Yesterday’s edition of the National Post highlighted the difficulties small business owners can have with succession planning for the family business.

In one article, Christine Dobby provides statistics for agribusiness owners from a 2010 survey conducted by the Ontario branch of the Canadian Federation of Independent Business. When asked if they had a plan to sell, transfer or wind down their business in the future, an astounding 52% had no plan at all and another 31% said that they had only had informal discussions with family. Only 17% said they had a formal, written plan.

Another article by Denise Deveau illustrates that an assumption that next generation will take over the family business can be a big mistake. According to a recently released Global Family Business Survey report from PricewaterhouseCoopers, 48% of Canadian business owners plan on passing their business to the next generation, which is a significant drop from 90% in 2007. Reasons for this include a change in demographics, where business owners are living longer and having fewer children. Parents who have never taken the time to discuss a succession plan with their children are finding out that the children they assumed would step in and run the family business are not interested in doing so.

These statistics illustrate the need for proper succession planning for the family business and the importance of discussing these plans with one’s family. It can avoid a multitude of problems that would inevitably occur for family, employees and customers alike, if the founder of a family business passes away without making proper provision for the business he or she worked so hard to establish.


Sharon Davis – Click here for more information on Sharon Davis. 

04 Dec

Payment of Taxes on Death – Hull on Estates and Succession Planning Podcast #89

Hull & Hull LLP Hull on Estate and Succession Planning, Hull on Estate and Succession Planning, Podcasts, PODCASTS / TRANSCRIBED, Wills Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , 0 Comments

Listen to Episode 89 – Payment of Taxes on Death

This week on Hull on Estates and Succession Planning, Ian and Suzana discuss the necessity of planning for the payment of taxes on death.


15 Dec

Non-Tax Aspects of Estate Planning – Part IV

Hull & Hull LLP Uncategorized Tags: , , , 0 Comments

When looking at the myriad of issues and problems that are created with succession planning for a family business, it is often forgotten that the family member who has been charged with (or readily accepted) the job of carrying on the family business is not him or herself particularly happy with the proposed division of the estate.

The question of "fair but not equal" is often a lifelong struggle for those who want to pass on a family business. In some cases, there is simply not enough money to fund a relatively equal division of the estate, as the core assets of the estate are tied up within the family business.

In certain situations, the non-participating family business members are treated in a "fair manner" by being given, for example, the proceeds of an insurance policy as opposed to the family business on death. The child who is charged with running the family business may not see that as being particularly fair. He or she may feel that for him or her to financially succeed, he will have to work in the business for the rest of his life, while the other siblings who are receiving fixed assets simply have to wait for the estate to fall in and they do not have the same lifelong work commitments to fulfill.



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