1. What Does Estate Planning Mean for a Business Owner?

2. What Does Alberta Law Say?

3. How Estate Planning Works for Business Owners

4. Choose an Executor Who Can Handle Business Interests

5. Protect Employees, Customers, and Suppliers

6. Coordinate Your Estate Planning Documents

7. Review Your Estate Plan Regularly

8. Common Mistakes Business Owners Make

9. Tax and Succession Considerations

10. When Should You Speak With an Estate Planning Lawyer?

11. How Bridgestone Law Can Help

Introduction

For many Alberta business owners, their company represents years, sometimes decades, of hard work, sacrifice, and determination. It may also be the family's largest financial asset.

While entrepreneurs often spend considerable time planning for growth, hiring employees, managing cash flow, and serving customers, many postpone planning for what would happen if they were suddenly unable to manage the business due to illness or death.

Without a comprehensive estate plan, uncertainty can arise almost immediately.

Employees may not know who has authority to make decisions. Customers and suppliers may question whether contracts will continue. Family members may be unsure who is responsible for operating or selling the business. In some cases, the business itself may lose value simply because there is no clear succession plan.

Estate planning for business owners is about much more than preparing a will. It involves creating a coordinated plan that protects your family, preserves the value of your business, provides clear authority for decision-makers, and helps ensure your business can continue operating, or be transferred or sold, in accordance with your wishes.

Every Alberta business owner should consider an estate plan that addresses both their personal assets and their business interests.

Depending on your circumstances, that plan may include:

• a professionally prepared will;

• an Enduring Power of Attorney;

• a Personal Directive;

• business succession planning;

• shareholder or partnership agreements;

• tax planning;

• trust planning where appropriate;

• clear executor powers relating to the business; and

• a strategy for the continued operation, transfer, or sale of the business.

A business often cannot simply "wait" until an estate is settled. Planning ahead helps reduce uncertainty, preserve value, and protect the people who depend on the business.

What Does Estate Planning Mean for a Business Owner?

Estate planning is often associated with deciding who receives your home, investments, or personal belongings.

For business owners, however, estate planning is considerably broader.

In addition to addressing your personal estate, your plan should answer practical questions such as:

• Who will have authority to operate the business immediately after your death?

• Can payroll continue?

• Who can sign contracts?

• Who has access to corporate bank accounts?

• Should the business continue operating or be sold?

• Who will value the business?

• If multiple children inherit the estate, should they all inherit the business?

• How will taxes affect the transfer?

• What happens if your business partner survives you?

Without clear answers to these questions, even a profitable business can quickly encounter significant operational and financial challenges.

What Does Alberta Law Say?

Business interests form part of your estate unless they pass outside the estate through another legal arrangement.

The administration of those business interests may involve several areas of Alberta law, including the Wills and Succession Act, the Estate Administration Act, the Business Corporations Act, partnership legislation, shareholder agreements, and federal tax legislation.

Depending on how your business is structured, your executor or personal representative may be responsible for preserving the value of the business while the estate is administered.

That responsibility may include obtaining professional advice from lawyers, accountants, business valuators, and tax professionals.

Because every business structure is different, there is no single estate planning solution that works for every entrepreneur.

How Estate Planning Works for Business Owners

Business owners often need an estate plan that goes well beyond a standard will. The goal is not only to decide who inherits the business, but also to ensure the business can continue operating while the estate is being administered.

A comprehensive estate plan should address several key areas.

Determine What Happens to the Business

One of the first questions is whether the business should:

• continue operating under new ownership;

• be transferred to family members;

• be sold to a third party;

• be purchased by existing business partners; or

• be wound up.

The answer depends on your personal wishes, the nature of the business, and whether there is someone capable and willing to continue operating it.

For example, a family farming operation may be intended to remain within the family for generations, while the owner of a consulting practice may prefer that the business be sold and the proceeds distributed among beneficiaries.

Clearly documenting these intentions can help your executor make informed decisions and reduce uncertainty for everyone involved.

Sole Proprietorship vs. Incorporated Business

The structure of your business has a significant impact on estate planning.

Sole Proprietorship

A sole proprietorship is not legally separate from its owner.

When the owner dies, the business assets generally form part of the estate.

This means your executor may need to deal with matters such as:

• ongoing customer contracts;

• outstanding invoices;

• employees;

• business debts;

• equipment;

• inventory;

• licences and permits; and

• the sale or closure of the business.

If the business depends entirely on the owner's personal skills or professional qualifications, its value may decline rapidly unless prompt action is taken.

Incorporated Business

A corporation is a separate legal entity.

Rather than owning the business directly, you generally own shares in the corporation.

Those shares usually become part of your estate unless they are transferred by another legal arrangement.

However, even though the corporation continues to exist after your death, practical decisions still need to be made.

Questions often arise regarding:

• who has authority to act as director;

• who can authorize banking transactions;

• whether shareholder agreements apply;

• whether shares must be sold or transferred;

• whether a buy-sell agreement is triggered; and

• how the shares will be valued.

Business owners should ensure that their wills and corporate documents work together rather than contradict one another.

Shareholder Agreements and Buy-Sell Agreements

If your business has more than one owner, a shareholder agreement or buy-sell agreement may be one of the most important documents in your estate plan.

These agreements often address issues such as:

• what happens if an owner dies;

• whether the surviving owners have the right or obligation to purchase the deceased owner's shares;

• how the purchase price will be determined;

• whether life insurance will fund the purchase; and

• how control of the corporation will continue.

Without a properly drafted agreement, surviving shareholders and the deceased owner's family may have very different expectations about who should own or operate the business.

Your will should be reviewed alongside these agreements to ensure they work together.

Choose an Executor Who Can Handle Business Interests

Administering an estate that includes a business can be considerably more complex than administering an estate consisting only of personal assets.

When choosing an executor, consider whether they have the ability to:

• understand financial statements;

• work with accountants and lawyers;

• communicate with business partners;

• supervise the ongoing operation of the business;

• make timely decisions; and

• preserve the value of the business during estate administration.

In some cases, appointing a trusted family member is appropriate.

In others, appointing a professional executor or naming co-executors with complementary skills may better serve the estate.

The most important consideration is whether the person will be capable of managing the additional responsibilities that accompany business ownership.

Protect Employees, Customers, and Suppliers

Many business owners focus on what their family will inherit but overlook the immediate impact their death may have on the people who rely on the business every day.

Without a clear succession plan:

• employees may be uncertain about their future;

• payroll may be delayed;

• suppliers may hesitate to extend credit;

• customers may lose confidence;

• important contracts may be affected; and

• the overall value of the business may decline.

A well-prepared estate plan helps ensure someone has clear authority to make decisions immediately after your death, reducing disruption and preserving business continuity.

Coordinate Your Estate Planning Documents

A business owner's estate plan should not consist solely of a will.

It should be coordinated with other important legal and financial documents, including:

• an Enduring Power of Attorney, allowing someone to manage financial affairs if you lose capacity during your lifetime;

• a Personal Directive, setting out your wishes regarding personal and health care decisions if you become incapable;

• shareholder or partnership agreements;

• corporate minute books;

• buy-sell agreements;

• life insurance policies;

• beneficiary designations;

• trust arrangements, where appropriate; and

• your overall tax planning strategy.

When these documents are prepared independently, inconsistencies can arise.

A coordinated estate plan helps ensure that each document supports the others and reflects your overall objectives.

Review Your Estate Plan Regularly

Businesses evolve over time.

You may:

• expand into new markets;

• purchase additional companies;

• admit new shareholders;

• acquire commercial real estate;

• restructure your corporation;

• retire family members;

• introduce the next generation into the business; or

• prepare the business for sale.

Each of these changes may affect your estate plan.

For most business owners, reviewing both their will and their succession plan every few years, or whenever a significant business event occurs, is a prudent way to ensure the plan continues to reflect their circumstances and long-term goals.

Practical Examples

Example One: A Family Construction Company

Mark owns a successful construction company in Calgary that he built over the past twenty-five years. His two children work in the business, while a third child has chosen a different career.

If Mark simply leaves his estate equally to all three children without addressing the business specifically, disagreements could arise regarding ownership, management, and the value of each child's inheritance.

Instead, Mark works with his lawyer and accountant to develop an estate plan that allows the children active in the business to continue operating it while ensuring the third child receives a fair share of the estate through other assets. This approach helps preserve both the business and family relationships.

Example Two: A Professional Corporation

Jennifer operates a successful dental practice through a professional corporation.

Although the corporation continues to exist after her death, the practice cannot simply operate without leadership. Her estate plan works together with her corporate documents to provide clear instructions for the temporary management and eventual sale of the practice, allowing patients, employees, and the estate to transition as smoothly as possible.

Example Three: Two Business Partners

Andrew and Chris each own fifty percent of a manufacturing company.

Years earlier, they entered into a shareholder agreement that provides surviving shareholders with the right to purchase the deceased shareholder's shares using life insurance proceeds.

When Andrew unexpectedly passes away, the agreement provides a clear process for transferring ownership. Andrew's family receives fair compensation for the shares, while Chris continues operating the business without prolonged uncertainty or conflict.

Common Mistakes Business Owners Make

Business owners often devote significant time to growing their businesses but overlook succession planning.

Some of the most common mistakes include:

Treating the Business Like Any Other Asset

A business is often far more complex than a bank account or investment portfolio.

Without instructions regarding management, succession, or sale, uncertainty can quickly reduce its value.

Failing to Coordinate Corporate Documents With the Will

A shareholder agreement, buy-sell agreement, or partnership agreement may contain provisions that differ from your will.

If these documents are inconsistent, your executor and beneficiaries may face unnecessary legal and practical difficulties.

Reviewing these documents together helps ensure they operate as intended.

Choosing an Executor Without Business Experience

An executor who has never managed a business may struggle with decisions involving employees, contracts, banking, taxation, and business operations.

Where a business forms a significant part of the estate, practical business experience can be an important consideration when selecting an executor.

Delaying Succession Planning

Many entrepreneurs assume they will deal with succession planning "next year."

Unfortunately, illness, incapacity, or death can occur unexpectedly.

Preparing a succession plan before it is needed provides certainty for your family, employees, customers, and business partners.

Overlooking Incapacity Planning

Estate planning is not only about death.

If you become temporarily or permanently incapable of managing your affairs, someone may need authority to deal with financial matters relating to your business.

An appropriately drafted Enduring Power of Attorney can become an essential part of protecting the continuity of your business during your lifetime.

Failing to Review the Plan

Businesses rarely remain unchanged.

New shareholders, expanding operations, commercial property purchases, financing arrangements, or changes in family circumstances may all require updates to your estate plan.

Regular reviews help ensure your planning continues to reflect the realities of your business.

Tax and Succession Considerations

Business succession often involves important tax considerations that should be addressed well before they become an issue.

Depending on the structure of your business and your overall estate plan, considerations may include:

• capital gains tax;

• the valuation of business interests;

• the use of available tax exemptions where applicable;

• corporate reorganizations;

• shareholder loans;

• life insurance planning;

• trusts, where appropriate;

• succession planning for family-owned businesses; and

• coordinating legal and accounting advice.

Every business is different, and tax consequences depend heavily on the individual circumstances.

For that reason, estate planning for business owners is often most effective when your lawyer, accountant, and financial advisor work together to develop a coordinated plan.

When Should You Speak With an Estate Planning Lawyer?

Business owners should consider obtaining legal advice if:

• they own an incorporated business or professional corporation;

• they operate a family business;

• they have business partners;

• they intend to pass the business to the next generation;

• they expect the business to be sold after their death;

• they own commercial real estate;

• they have shareholders or partnership agreements;

• they employ staff whose livelihoods depend on the business;

• they have significant corporate assets or investments; or

• they have not reviewed their estate plan in several years.

Seeking advice early provides more planning opportunities than attempting to address succession issues during a crisis.

How Bridgestone Law Can Help

For many entrepreneurs, their business represents a lifetime of hard work and one of their family's most valuable assets. A comprehensive estate plan helps protect not only that investment but also the employees, customers, business partners, and family members who rely upon it.

Bridgestone Law assists business owners throughout Calgary and Alberta with wills, estate planning, business succession planning, probate, and estate administration. We work closely with clients and, where appropriate, their accountants and financial advisors to develop practical estate plans that reflect both their personal wishes and their business objectives.

Whether you own a small family business, a professional corporation, or a growing company with multiple shareholders, thoughtful planning today can help preserve the value of what you have built and provide greater certainty for the future.