Passing on the family business: Tips for succession planning

You’ve spent years building your business. It’s a reflection of your values, your vision, your passion, and maybe even your name. Now it’s time to think about what comes next. You’d like to keep the business in the family. Maybe your children, nephews or nieces have already expressed an interest in helping to help keep your legacy alive.

These tips are for family members on both sides of this transition: the business owners who are ready to move on to the next chapter of their lives and the successors preparing to take the reins. Careful planning can help make the process as smooth as possible.

In Canada, 63.1% of businesses are family-owned businesses.¹ You might think children are always the logical successors, but that’s not necessarily the case. Emotions and money can sometimes get in the way.

For starters, the children may have their own doubts. They’ve watched their parents work hard and make sacrifices to keep the business running. They might worry they’re not up to the task—or not want to set their own dreams aside.

Family dynamics may also be a concern. Choosing one sibling over another can stir up rivalries and other difficult feelings. Business owners may want to include the business in their broader estate planning to make sure their family members feel fairly treated, whether or not they’ve been actively involved in operations.

Zooming out, tax considerations can also affect business succession planning. For example, Quebec’s tax regulations used to differ from federal ones, meaning intergenerational transfers didn’t always receive the same favourable capital gains treatment at both levels of government. As a result, it was often a better financial choice for business owners in Quebec to sell their business to a third party rather than their own children.

Fortunately, that changed in 2025. Today, selling your business to a family member is a viable option, both strategically and financially, all across the country. “Before, selling to your children simply wasn’t in your own best interests,” explains Louis Roy, who heads up the Business Transfers Team at Desjardins. “But now, the federal and provincial tax rules are aligned. The door is wide open.”

These changes have made it easier for business owners across Canada to pass their businesses on to the next generation. With the right preparation and support, the transition can be deeply rewarding for everyone involved.

Succession planning is a gradual process that touches on the human, strategic and financial dimensions of the transfer. To give everyone ample time to prepare, it’s best to start thinking about your exit strategy between 3 and 10 years before you plan to step aside.

According to Louis Roy, passing down the family business isn’t just about crunching the numbers. “There are a lot of human aspects to consider. The owners need to learn more about their potential successors and their views on business continuity. What interests them? What’s their vision for the future? What role would they like to play? And whose support will they need? In turn, those successors need to ask what role the current owner hopes to play and what kind of support they would be willing to provide.”

A carefully considered business succession plan can help both sides approach the ownership transition with confidence.

A well-thought-out succession plan is the cornerstone of any family business transfer. It gives both sides an opportunity to review all the important human and financial aspects involved.

Here are 6 key steps to guide you through the transfer planning process.

Before diving into the numbers or the legal structure, you need to tackle the biggest question: What do you want the future to look like? This can help you decide the best way to pass on the business. Maybe it means the business will stay 100% in the family, or maybe you’ll want to bring in a third party as well.

Don’t forget about your own future! Are you planning to retire completely, or are you open to handing your business over gradually and shifting into a mentorship or administrative role?

It’s also important to nail down the timeline, so everyone has a realistic amount of time for each phase of the leadership transition.

Once you have a general idea of your future, it’s time to set your financial objectives. What do you want your lifestyle to look like after you step away? Answering this question will help you decide how much income you’ll need.

From this standpoint, a business valuation is crucial. It gives you an objective, fair-market value for your business. That type of transparency can be especially welcome for intergenerational transfers, since it can help prevent family conflict, make it easier to obtain financing and give your successor a realistic foundation to build upon.

Valuation methods can vary depending on your industry and type of business. A clearly documented independent appraisal can help everyone gain perspective and focus on the facts.

Your family members have probably grown up around the business. They generally understand the corporate culture you’ve created and have witnessed all the work you’ve put in.

You’ll need to have frank, open discussions with your family. Leaving things unsaid or making assumptions can lead to misunderstandings that could jeopardize the business transfer or create unnecessary tension. Being clear and honest will help keep everyone’s expectations aligned, which can help head off big disappointments.

Successors will also need to take time to get their thoughts in order. They’ll need to figure out whether they really want to take over the family business, or if they’re just doing it out of a sense of duty. Once they’re sure they’re interested, they’ll still need to address any gaps in their training or experience. All of these concerns deserve to be explored honestly and openly, ideally with outside support. If your successor isn’t fully prepared, or their heart isn’t in it, they could struggle to take on a leadership role and keep the business going.

Even with these caveats, Louis Roy believes strongly that family succession is often the best decision. “There’s a level of knowledge transfer that just can’t be replicated by someone coming from the outside.” From this standpoint, it’s crucial to ensure that the family members taking over the business have adequate support.

When the business is being transferred to a family member, there are several ways to mitigate the financial and emotional risks that may arise. For example, you don’t need to change everything overnight, and you can find a governance structure that reflects the strengths and experience of everyone involved. You might opt for a gradual transfer of ownership or a group buyout, with multiple relatives taking over the business. Or you could remain a shareholder with no involvement in day-to-day operations.

You might also explore staying on as a mentor—without overstepping your bounds. Your presence and wisdom could be invaluable. But if you’re ready to step away entirely, an external consultant could also be an option. They can provide a neutral, objective perspective throughout the transition period and help preserve family bonds.

There are three factors that can help with a smooth transfer:

• The successor’s capacity and motivation. They need to be genuinely willing, not coerced.
• A comprehensive training plan that covers the technical, business management, leadership and customer service skills they’ll need.
• Clear, ongoing communications between the owner, the successor, the employees and any partners.

To make the transition as smooth as possible, you’ll need a family business succession plan. Ideally, you’ll work on the plan together to make sure everyone is moving forward toward a shared vision.

The succession plan includes several different components. There’s a strategic plan, a communication plan and a management transfer plan. Together, they help you clarify where the business is going and how the transfer will be announced. You’ll need to share the news with clients, employees and anyone else who does business with you. You want the strategic plan and communications to be reassuring—after all, you’ve spent years building these relationships!

Succession financing may seem daunting, but it deserves close attention. If the financing package is poorly structured, you could all lose out. It’s good to remember that this isn’t a “one-size-fits-all” situation. Instead, you’ll need to focus on building a creative yet balanced financing package that protects the seller’s interests while respecting the buyer’s financial capacity.

There are a number of different ways to finance the transfer. Here are some examples:

• Personal contributions from the successor. This helps demonstrate their commitment to the business and can also boost their credibility with future financial partners.
• Corporate loans from a financial institution, with support from other partners as needed.
• Vendor financing, also known as “vendor take-back.” In this case, the seller finances the sale, and the buyer pays them back over an established period. This makes it easier for the next generation to take over, while showing that the seller is committed to a successful transition.
• Mezzanine financing that combines debt and equity, structured specifically for buyouts.

Both parties will also need to pay close attention to the tax considerations of the financing option so everyone benefits from informed and fair financial planning.

Once you’ve done all this, it’s time to carry out the transition together. A common misconception is that the process ends as soon as the documents are signed, whereas that’s really just the beginning. The transition is when roles are redefined, which means that tensions may emerge and your business’s resilience may be put to the test.

Here are some tips for a smooth transition:

• Clear boundaries: Who decides what? Set out everyone’s responsibilities: the retired owner, the new leader, the board of directors and any other family members.
• Conflict resolution mechanisms: Decide how you’ll manage any operational or family disagreements before a conflict actually arises.
• A competent management team: The successor shouldn’t be handling the transition period alone. They’ll need a strong, experienced team at their side to make it a success.

The previous owner will also need to think about what they’ll do next. After dedicating so many years to the business, stepping away can feel like a shift in their identity. Some may find it hard to let go, while others may want to disengage entirely. Either reaction could create tension with the new owners. Personalized support can help everyone better navigate this important step in the succession process.

Transferring a family enterprise is a complex, emotional process, even when it’s well planned. No matter how well intentioned everyone is, it can still expose cracks in the family dynamics, stir up identity issues and lead to a power struggle. That’s why external support can sometimes be a strategic investment.

Here are some of the professionals you may choose to work with as part of the planning process:

• Business transfer consultant or coach: For a neutral, outside perspective and to help you plan the process, have tough conversations and stay on track.
• Accountant or tax specialist: To design the financing package, optimize any taxes paid during the business transfer process and ensure transactions comply with applicable regulations.
• Financial institution: For financing solutions and support services every step of the way. A variety of professionals can assist you, including account managers and financial planners.
• Lawyers and notaries: To draft and validate business transfer agreements and shareholder agreements that protect the interests of all parties.
• Specialized support organizations: For support programs for business succession planning.

These external consultants have technical know-how, but they’re also trained to keep discussions neutral if emotions get in the way. They can help you ask the right questions, structure your discussions and stay disciplined as you carry out the plan.

When a family-owned business is handed down, it’s so much more than a financial transaction. It’s a passing of the torch, and a decision that affects the future of both the business and your family.

Takeaways:

• Start early: Timely succession planning is a key factor in minimizing risk and boosting your chances of success.
• Communicate clearly: When things go unsaid, your family business transfer can suffer. Having frank conversations and respectful, clear discussions will help everyone understand each other and make the transition go more smoothly.
• Get support: Professional assistance is a strategic investment that can help give structure to your discussions and keep things neutral.
• Think about the future you want: A strong transition lays the foundation for the next chapter of your family business. The better prepared you are, the greater your chances of long-term success.

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¹ Conference Board of Canada (2019). The Economic Impact of Family-Owned Enterprises in Canada.