J. Paul Wilson GUEST EDITORIAL

Editor's Note: This is the first of a two-part series on business succession. The second part will run Jan. 5.

IF YOU ARE in business, you are going to leave your business at some point by selling, retiring or being forced out by disability or death. If you do not have a succession plan, or make the decisions and implement a plan, decisions will be made for you and they might not be what you wanted to happen.

Oh, and you will almost certainly pay significantly more tax.

The succession planning process for your business starts with determining what you want to happen, no matter what, then arranging your financial affairs accordingly, in a tax-effective manner. An additional benefit to going through this planning process is that tax-planning opportunities that benefit you now are often uncovered.

So how do you get started? In today's financial world, few can go through the maze without help, and the business succession planning process is no exception. Your certified financial planner and chartered accountant are equipped to take lead roles in the planning process.

Need an adviser? The Institute of Chartered Accountants maintains a database of Chartered Accountants (http://www.cica.ca) and the Financial Planners Standards Council maintains a database of licensed financial planners (http//www.cfp-ca.org).

Every business and personal planning situation is different. Every succession plan is also different. It is therefore important to thoroughly understand your situation and your objectives before rushing into a solution - be wary of "cookie-cutter" packaged solutions. Taking the time to think through these six key steps will help start your business succession plan on the right track:

1. Assess your current situation.

2. Understand your goals for your business and family.

3. Identify and prioritize your action plans.

4. Select your best action plan and set a timetable.

5. Document your decisions.

6. Implement and monitor your plan.

Assessing your current situation is the first step. What is the value of your business? What would you pay for it? What would you sell it for? If you were to sell the business today, what steps would be required to maintain profitability? Special skills needed to run the business? Relationships with suppliers? Relationships with customers? Lines of credit? Your CA, along with your CFP should be able to help you with this step. Later in the planning process you will require the services of your lawyer and may also require the services of a chartered business valuator and other professionals.

Understanding your personal goals and the goals for your business and family is arguably the most important part of the entire planning process. You are planning a new stage of your life, so it is important to take the time to revisit your life goals and ask yourself some questions.

What does a successful retirement mean? What are you retiring to? What do you want to do with the rest of your life? What are your hobbies? Where do you want to live? What do you want your legacy to be? In short, plan your life, your lifestyle.

Today, there are more resources to assist than ever before, with planning information available at human resources departments and libraries, and from financial and lifestyle planners. Once you have determined your lifestyle objectives, your CFP will be able to help you calculate your funding needs and work with your CA and lawyer to align your succession plan accordingly.

What business succession plan will be best for you and your family will depend on the business decisions you make involving family members. Be aware that doing what is "best for the business" without family discussion and involvement can put a serious strain on your family relations.

Other matters that need to be considered include a long-term vision for business. Can you fund your retirement lifestyle and take your business to the next generation? How do you want to distribute ownership? Should part of the business be liquidated?

If kept in the family, which child? If one child receives ownership in the business, what assets will your other children receive? What is fair? Do your children want to join the business? Children have the necessary skills? Maintain ownership with an outside manager? Sell to employees? Control to spouse? How much control after you have retired? What do you want to happen if you die or get disabled while involved in the business? Does your business qualify for the Enhanced Capital Gains Exemption? If not, are there any adjustments you can make to your corporate structure to qualify?

There seem to be so many questions that many business owners feel overwhelmed and put off starting the planning process.

There is a solution. You can crystallize your business and personal financial goals through a discovery process with questionnaires available through a certified financial planner or CA. Then, with a preliminary analysis identifying problem areas or opportunities, you are better equipped to identify, prioritize and select your best action plan - the focus of next week's article.

J. Paul Wilson is a Halifax-based financial planner. He can be reached at paul@maritimewealth.com