June 2026 - Legal Update - Planning to Sell Your Business?

Ontario has launched a new initiative called “Succession Ontario”. This initiative is a timely reminder that business owners should always be prepared for the possible sale of their business, because having a proper plan in place can take time. One important issue in succession planning is often overlooked. Business owners who operate out of a property they own have not separated their operating business from their real estate, and this can lead to surprising outcomes, which is the focus of this newsletter. Consider a mechanic who owns their own shop. In this case, the business and the property may be owned by the same corporation, or both may be owned personally. However, the business and the building are different assets. They may have different buyers willing to take different risks at different times, and these options have serious tax consequences. A child or third party may want to take over the business or a part of the business. However, they may not want to own the property. A buyer who wants to purchase the business may also want to lease out the premises. With a proper succession plan, an owner may be able to sell the company, stay on as an employee, and generate rental income from the business as a landlord. Legally separating the operating company from a distinct real estate company can sometimes be the best path forward for business owners. A proper legal separation may help separate the financials and expenses of the business, or act as a way to efficiently transfer operating income to a separate legal entity for long-term investment and mortgage payments. This legal separation can also assist with risk management, financing, tax planning, and estate planning. Since every situation is unique, speaking with a trusted tax advisor is always recommended. For those who are looking to purchase commercial real estate or who operate their business out of a property, succession planning must start long before a deal is on the table. Business owners must consider whether their current structure supports their long-term goals from a tax and estate planning lens. For many Ontario businesses, the building connected to the business is a major part of their business planning that cannot be overlooked. If you are looking for legal advice specific to your business, please contact Michael at [email protected] or call Liddiard Law at (905) 932-5437. Michael Craig Liddiard, BA MA JD (905) 932-5437 [email protected] Liddiard Law Professional Corporation