Baby Boomer Retirements Will Cause a Big Wave of Business Transfers: CFIB

TORONTO – According to the Canadian Federation of Independent Business, the retirement of "baby boomers" will result in a huge transfer of business ownership over the next five to ten years, but only a small percentage of homeowners have of a formal written succession plan.

In a report released Wednesday, CFIB says that 47% of small and medium-sized business owners (SMEs) intend to leave their business in the next five years and 72% of them in 10 years.

However, the CFIB report indicates that only 8% of surveyed homeowners have a formal written succession plan. About 51% had no plans and 41% had an informal plan.

"While it's encouraging that a good chunk of business owners are planning to move their business to a new generation, the lack of formal planning creates significant risks for competitiveness." and Canada's prosperity, "says CFIB in a report by research badyst Marvin. Cruz.

"With badets potentially greater than $ 1.5 trillion that will change hands over the next 10 years, Canada can not afford to have so many small business owners unprepared for this transition."

CFIB's findings are based on an online survey of 2,507 small business owners in May.

In four out of five cases, retirement was cited as the reason for the planned departure of a company. Other reasons include a transfer to another company or a lack of profit in their current business.

About 62% of survey respondents said they would rely on selling their business as a source of retirement income.

CFIB has stated that formal succession plans have the advantage of being developed with the help of professional advisors who can help develop a conflict resolution calendar and process.

It also identifies a number of obstacles to creating a succession plan, such as family members who do not want to take over the business and entrepreneurs who prefer to start a new business that to buy an existing business.

"Currently, there are very few options in Canada to connect people who want to leave their company with those who might be interested in buying a business and who could be an area to explore for. governments, "says the report.

It also suggests that the government amend the tax rules so that transfers of small businesses to family members are treated in the same way as to a non-family purchaser.

Under the current rules, a gain in business value relative to the owner's tenure is treated as a dividend if it is sold to a family member and as a capital gain. it is sold to a non-family buyer.

"In reality, these rules may discourage the transfer of a business to a family member because the transaction does not include the right to a lifetime capital gains exemption and is therefore more heavily taxed."