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15 Jan

Canada Faces Mass Exodus of Small Business Owners

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Posted by: Kim Seifert

Canada Faces Mass Exodus of Small Business Owners:

75% cite retirement as the reason for leaving their business, while a smaller number plan to leave because of stress, to step back from their responsibilities as an owner, or to move to another business venture. More than three-quarters of small business owners plan to exit their businesses within the next 10 years, according to a new report by the Canadian Federation of Independent Business (CFIB).
The report said more than $2 trillion in business assets could be in play over the next decade as 76% of small business owners intend to exit their business activities.

Challenges caused by the Covid-19 pandemic have affected owners’ exit timelines:

1) Plan to exit their businesses within the next 10 years.
2) More than $2 trillion in business assets could be in play over the next decade.
3) Most common approach is to sell to an unrelated buyer (49%), while 24% will sell to a family member and 23% to their employees.
3) Only one in 10 business owners (9%) have a formal business succession plan.
4) 56% of owners say their business is still making less than normal revenues, 64% still holding pandemic debt, and 77% are still under pandemic stress. Almost four in 10 (39%) business owners have modified their exit date because of the pandemic: about 17% have accelerated their timeline, while 22% have delayed it by at least one year.

Canada Faces Mass Exodus of Small Business Owners — Will Bill C-208 hinder the sale to children?

In 2021, the federal government passed Bill C-208, which allowed business owners selling shares of their business to their child to take advantage of the lifetime capital gains exemption on the proceeds of the sale. Before the change in law, the proceeds of disposition on a sale of a business to a child were taxed as a dividend. 

However, C-208 was a private member’s bill that didn’t have the Liberal government’s endorsement. In the 2022 federal budget, the government said it would look at modifying the rules “to protect the integrity of the tax system while continuing to facilitate genuine intergenerational business transfers.”

In the report, the CFIB called on the government to “honour the spirit” of Bill C-208 in any amendments it proposes. It also said the government should simplify the LCGE and increase the amount to $1.2 million.

Report by the Canadian Federation of Independent Business (CFIB). More Information

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