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2 4 - The Oakville Beaver W eekend, S a tu rd a y J a n u a ry 7, 2 0 0 6 Marketing coach speaks at Company of Women Maxine Hyndman, author of The True wealth/ she believes, is not Naked Millionaire: A Women's about how much money you've Guide to a Healthy Relationship made - or lost - rather, it's about with Money, will be the guest developing a healthy relationship speaker at the Jan. 10 dinner for Company of Women. As a money and marketing coach, Hyndman has helped hun dreds of individuals make financial leaps in their lives by sharing her story and unique perspective on the relationship with money. At the heart of her financial coaching is the concept of "wealth." with money, one that's free from the cycle of fear, avoidance and guilt. "Many of us have a dysfunction al relationship with money. We often feel overwhelmed by financial concerns and decide that we are incapable of coping with money matters," observes Hyndman. She became interested in money and her relationship with it when she filed for bankruptcy and has since focused her career on helping others gain financial literacy. Hyndman has also changed her attitude to money. "I'm no longer willing to compromise my values for work that pays big bucks. I only take work that is rewarding, both spiritually and financially." Company of Women is an organization that supports, con nects and promotes women in busi ness. Its monthly dinner meetings are open to all women and are Held at the Burlington Convention Centre, 1120 Burloak Drive, Burlington. Cost for the evening, which includes a three course dinner, is $45 for members and $55 for non members, plus GST. The evening starts with networking from 5.306.30* dinner and then the guest speaker at 8. pm. To register or find out more, see www.companyofwomen.ca or con tact Anne Day at 905-338 1771. M a xin e Hyndm an LEGAL PLANNING FOR THE SALE OF A FAMILY BUSINESS In addition to plans to grow or maxi mize the earnings of the business, every business owner should have a long range plan for the ultimate disposition of die business. Small private companies, often referred to as "family businesses", are quite often transferred from one gen eration to the next. However, the focus of this article is the sale of a fam ily business to an outside third party and the steps that the business owner should take, well in advance, to maxi mize the benefit of the sale. The decision to sell a business is often not planned but is, rather, the result of a convergence of circumstances (emergence of a motivated buyer or health concerns of the owner). These opportunities are generally time sensi tive and usually do not allow the vendor of a family business to organize the companyis affairs in a manner which could maximize die sale price or reduce the taxes payable on the sale transaction. Every prudent business owner should consult widi his/her lawyer and accountant once it is clear that, for whatever reason, the business will not be transferred to the next generation. The business owner will be advised as to how to plan and struc ture its business affairs in order to take advantage of strategies designed to maximize die net return on die sale of the business. The following are some of the factors to be considered in preparing your business for sale: The gain on the sale of shares in a Canadian controlled private corporation ("CCPC") may be partially or wholly exempt from capital gains tax. 1. Capital Gain Exemption - Since most CCPC s are started with minimal contribution of share capital, the gain on the sale of shares of a suc cessful company could be substantial. If the shares are iqualified sharesi as defined in the Income Tax Act (the "Act"), the first $500,000.00 of the gain (or the unused portion of this lifetime exemption) is exempt from capital gains tax (a current tax savings of approximately $120,000.00). For the shares to "qualify" however, certain tests, prescribed in the Act, must be satisfied. These are referred to as the "90/10 rule" and the "50/50 rule" both of which are designed to restrict a shareholder from selling a business containing non-active business assets (casual investments and cash) and, to increase die gain on the basis of die business owning such non-active busi ness assets. In order to satisfy the "90/10 rule", die owner/shareholder could distribute the non-active busi ness assets (by bonus or dividend) immediately prior to closing of the sale transaction. However, die "50/50 rule" requires diat die corporation s assets consist of not greater than 50% non active business assets for a period of two years prior to the sale. A finan cially successful business will often accrue retained earnings, which could put the corporation offside of the "50/50 rule", unless appropriate steps are taken well in advance of die sale. Accordingly, steps should be taken to distribute non-active business assets in order to isanitizei the company at least 2 years prior to a possible sale of the business. 2. Freeze techniques to Enhance the Capital Gains Exemption - Freeze techniques are triggering "attribution" to the original shareholder. In a simple freeze, the common shares (the "growth" or "equity shares") are exchanged for preference shares with an aggregate redemption value equal to the fair market value of the common shares. Once that is achieved, family members can subscribe for new common shares at a nominal price - there is no equity attributable to these common shares until the value of die company exceeds the frozen value of the preferred shares.. If the company continues to grow, the original shareholder and each family member who subscribes for common shares after die freeze may then have the opportunity to uti lize the capital gains exemption (capped at $500,000.00) provided that the shares qualify. The earlier that die original sharehold er freezes the growth shares, the greater the opportunity for family members to benefit from the growth in the newly-issued common shares. This article was written by Ronald ]. Weston, a partner at the law firm Feltmate Delibato HeaglaLLP. Ron can be contacted directly by telephone at (905) 631-3656 or by email at rweston@fdhlawyers.com. F e lt m a t e D e lib a to H e a g le OAKVILLE OFFICE: 2010 W IN S TO N PARK DR., SUITE 301 OAKVILLE, O NTAR IO 905.82 9.3 200 FAX: 9 0 5.82 9.3 2 77 BURLINGTON OFFICE: 3600 BILLINGS COURT, SUITE 200 BURLINGTON, O NTAR IO 905.639.8881 FAX: 90 5.639.8017 Fax 905-526-0732 www.rossmcbride.com Comm erce Place, 1 King S t W e st Hamilton heatherlaidlaw@cogeco.ca E s t a t e a n d C o m m e r c i a l L it ig a t io n 9 0 5 .3 3 7 .9 6 3 3 Ronald J. Weston,a lawyer at the law firm Feltmate Delibato Heagle LLP. THIS WEEK S COLUMN COURTESY OF often used to place growth shares in die hands of family members without RONALD CAN BE CONTACTED DIRECTLY BY TELEPHONE (905)905-631-3656 OR BY EMAIL AT rweston@fdhlawvers.com The opinions expressed in this column are those of the author and do not necessarily represent the views o f this newspaper. LO O K HERE EACH WEEK FOR VALUABLE IN F O R M A T IO N CO URTESY O F THESE LEGAL PRO FESSIO NALS. F o r ANy in q u I res About L e q a L N ew s & V ie w s , c o n t a c t SI ia w n a S a Iv o a t T I ie G a L v i U e B eaver 9 0 5 .8 4 5 .5 8 2 4 , e x t . 286