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Wills for Business Owners

Business succession planning in your will. Corporate shares, partnerships, buy-sell agreements. Protect your business and family. Lexaltico LLP.

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Frequently Asked Questions

Should a business owner have a different type of will?

Yes. A standard will doesn't address business succession, tax planning, or key person insurance. Business owners should create a comprehensive estate plan including: a will designating what happens to the business (passes to a family member, sold, liquidated), a buy-sell agreement (buy-back terms if you have partners), succession documentation, and beneficiary designations on life insurance or shareholder loans. Many business owners use holding companies, trusts, and corporate structures to minimize tax on death and provide flexibility. Consult an estate lawyer experienced in business succession planning.

Relevant legislation: Succession Law Reform Act, S.O. 1990, c. S.26; Income Tax Act, S.C. 1985, c. 1

What is a buy-sell agreement and do I need one?

A buy-sell agreement specifies what happens to your business ownership when you die or become disabled. It prevents your family from inheriting a business they can't manage and ensures business partners aren't forced to work with your heirs. Common structures: partners buy your interest from your estate (funded by life insurance), or a business valuation formula triggers a buyout. Without a buy-sell agreement, business disputes often destroy the business. If you have partners, a buy-sell agreement is essential. If you're a sole owner, succession planning (who inherits, how it's sold) is critical.

Relevant legislation: Partnership Act, R.S.O. 1990, c. P.5; Business Corporations Act, S.O. 1982, c. 4

How is a business valued for estate and probate purposes?

Your business is valued at its fair market value on the date of death for probate fees and estate tax purposes. Valuation methods include: comparable company sales, revenue multiples, asset-based approaches, or professional appraisals. A significant discrepancy between your business's value and your family's assessment can trigger probate disputes and CRA audits. Working with a business valuator and your accountant during life ensures clarity. Documenting your business value and succession plan prevents confusion and litigation after death.

Relevant legislation: Estates Administration Tax Act, R.S.O. 1990, c. E.21; Income Tax Act, S.C. 1985, c. 1

Should I use life insurance to fund buy-sell agreements?

Yes, absolutely. Life insurance is the most cost-effective way to fund buy-sell agreements. If you own a business worth $1 million and die, life insurance proceeds ensure your partners can purchase your interest from your estate—preventing forced sales or disputes. Insurance is tax-efficient (proceeds received tax-free by the policy owner) and provides liquidity without burdening the business. A common structure: partners each hold insurance on the other, with proceeds funding the buyout. Without insurance, business succession often forces fire sales or family hardship.

Relevant legislation: Income Tax Act, S.C. 1985, c. 1, s. 148

Can my family run my business if I die?

Whether your family can run your business depends on their skills, experience, and interest. Many businesses fail because heirs lack the expertise or drive to continue operations. Advance planning is essential: document business procedures, identify key personnel who could lead, consider hiring a non-family CEO, or plan for a sale. Insurance, trusts, and buy-sell agreements protect the business and your family's inheritance. Some families decide upfront to sell the business and distribute proceeds rather than attempt continued operation.

Relevant legislation: Succession Law Reform Act, S.O. 1990, c. S.26

What tax issues should a business owner address in their will?

At death, your business may trigger significant capital gains tax (triggered by deemed disposition of shares or property). You can defer this tax by leaving the business to your spouse (spousal rollover) or paying tax before death. Holding companies or trusts can reduce tax and provide flexibility. Preferred shares, flow-through structures, and life insurance can minimize the tax burden on your heirs. Tax planning for business owners is complex; work with an accountant and estate lawyer together. Proper planning can save your family tens of thousands in tax.

Relevant legislation: Income Tax Act, S.C. 1985, c. 1, ss. 84-89

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Negotiated buyout preventing costly oppression remedy litigation

A 40% minority shareholder alleged oppression after being excluded from management decisions. Rather than proceeding to a contested s.248 OBCA application, we facilitated a structured buyout at fair market value, including a non-compete and orderly transition plan that preserved the business and its key relationships.

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“I had the absolute pleasure of working separately with two lawyers from Lexaltico — Pooja Lassi and Matthew Ram — on different matters. The level of professionalism, expertise, and care demonstrated by each of them was consistently exceptional. They do not simply service your needs — they take the time to thoroughly understand your situation and proactively problem-solve.”

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“I had the absolute pleasure of working separately with two lawyers from Lexaltico — Pooja Lassi and Matthew Ram — on different matters. The level of professionalism, expertise, and care demonstrated by each of them was consistently exceptional. They do not simply service your needs — they take the time to thoroughly understand your situation and proactively problem-solve.”

— SJR

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