What can go wrong when buying a business in Canada?

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Buying a business is a major commitment in terms of the time, money and personal resources it takes to take on this type of transaction. As such, it is critical to prepare for the possible obstacles and complications that can arise.

If you are an entrepreneur wanting to buy an existing business, you should know what to watch out for before signing a purchase agreement and what could go wrong.

You and the seller could clash in your motivations

It can be emotional for owners to sell a business. Some sellers have no choice but to sell; some companies have been run by the family until now. Consider these details when it comes to discussing your plans for the business.

While you should not lie to the seller, you can give measured responses and explanations of your plans. As a buyer, you may have no obligation to preserve specific business elements preferred by a previous owner. Still, it would be wise if you did not insult or minimize the seller’s contributions.

You may not see all the liabilities

There are situations in which prospective buyers fail to see certain problems or blind spots. Such oversights could stem from overconfidence or the misinterpretation of data.

It is also possible that the seller could be covering up inadequacies or flaws in the business.

As such, conducting due diligence is vital for any buyer. This article provides some tips for this process, though it can also be wise to call outside professionals for help and allow room for objectivity.

The sale moves too slowly or too quickly

Again, buying a business is a significant commitment. Dragging out the process or rushing through it could wind up costing a lot of money and creating complications for the buyer.

If you are in a position to buy a business, you should progress at a comfortable speed. Keep things moving to minimize changes in the company, the economy and financial resources, but be ready to take a step back if something seems amiss.

These complications can arise on top of the logistical challenges that come with complicated transactions. As such, preparation, legal guidance, and careful speculation can be critical components of successfully navigating this process.

Traits to look for when appointing estate decision-makers

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When you pass away or if you become incapacitated, other people will make decisions on your behalf. Depending on the circumstances, a person could decide whether to sell your home, where you should receive end-of-life care or how to distribute your property to your loved ones.

These are not insignificant matters. They reflect your beliefs and values, and they can affect your well-being and your legacy. As such, choosing the right people to fill these roles will be critical.

Who are the decision-makers?

In the context of estate planning, there can be multiple people appointed to different decision-making roles. Typically, people select:

  • An executor to carry out your wishes during the administration of your estate
  • Powers of attorney
  • A representative to assist with healthcare decisions
  • Guardians for a child or adults (also called a committeeship)
  • Trustees to manage a trust

Various people may fill these roles, or you might decide to have one or a couple of people managing everything.

Traits to look for (and look out for)

Considering the authority people in these positions can have, parties should appoint them thoughtfully. Someone capable and willing to fulfill their duties responsibly is often:

  • Organized
  • Responsible
  • Dependable
  • Familiar with your wishes and values
  • Capable of making decisions under stress
  • Comfortable having legal and financial conversations
  • Committed to putting your wishes ahead of his or her own interests
  • Able to diffuse or navigate complicated familial dynamics

On the other hand, you should think carefully before appointing someone to financial or medical decision-making roles if he or she:

  • Does not know you very well
  • Does not care about what you want
  • Disagrees with your beliefs
  • Is easily overwhelmed
  • Cannot handle complicated and emotional situations
  • Does not have a good relationship with your family
  • Is unwilling to put your interests before their own
  • Struggles with substance abuse, gambling or other addictions that could affect their ability to make responsible decisions

Of course, one person may not embody all the positive traits, and no one is perfect. However, when you are appointing someone to make legal, financial or medical decisions on your behalf, you should feel confident that he or she is compassionate, capable and committed to your wishes.

4 costly missteps when buying a business

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Starting a business from the ground up can be appealing, but it is not the only option. Buying an existing business could be an appealing opportunity, as well. It can be less uncertain than starting from scratch, and it could be easier to secure financing from investors and banks.

That said, there are risks that come with buying a business. You might already know that you should review a company’s history and seek legal guidance before signing anything. But if you are thinking of buying a business in British Columbia, you should also avoid these less-obvious but costly pitfalls.

  1. Buying a business that you don’t understand – No matter how solid an opportunity may seem to be, it can fall flat if you do not understand the industry or type of business. If the model or market does not make sense or interest you, it might be more trouble than it’s worth. Consider businesses that align with your knowledge and interests so that you can be in a better position to operate it successfully.
  2. Dismissing the location – Potential buyers likely appreciate the importance of a business’s physical location. They might see that it’s close to their home and in a desirable area and assume that’s all that matters. However, you must also consider details like local ordinances, taxes and operational restrictions, which vary widely depending on location.
  3. Failing to consider potential (or lack of potential) – An existing business might come with customers, inventory and a reputation in the marketplace. Still, you must also evaluate potential opportunities and challenges. Is there space to grow? If there is intellectual property, how long will you have protection over it? Are there employees or partners with long-term contracts? These elements may seem secure now, but be sure you examine how long that security might last.
  4. Carrying on business as usual – Even if the business you buy is running smoothly, failing to address the change in ownership can be a missed opportunity. Employees, partners and customers often want to know what they can expect – whether that includes changes or not. And promoting the business as you see it can reinforce your role as the new owner.

These missteps can have costly repercussions that follow the enterprise and business owner well into the future. As such, acknowledging them and taking steps to avoid them can be critical.

4 things to leave out of a will if you want to prevent conflict

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The death of a loved one can leave friends and family devastated. People can be struggling with grief and sadness; some may feel lost or alone. Adding a controversial or confusing will to the mix can make the situation even more upsetting because it can create a complicated legal environment that loved ones must navigate.

Jilted or angry parties could wind up contesting the will, which can create even more conflict and possible delays in the property distribution process. To prevent this, will-makers can leave the following out of their will:

  1. Unpleasant surprises – A will is likely not the best place to reveal unpleasant surprises. Matters like true parentage, extensive property losses or grievances can be especially disturbing to people who are already struggling with a death. Such news could increase the likelihood of fights and legal battles. Therefore, reconsider using a will as a weapon or way to break bad news to family.
  2. Unequal gifts – There are many reasons people may want to leave unequal gifts to children or other heirs, but you could be creating more problems than you might solve. Unequal gifts can make it unnecessarily complicated to administer an estate. Further, it can create or exacerbate strain among beneficiaries. And in British Columbia, unfair gifts could be the basis on which someone can contest a will.
  3. Confusing terms – Leaving anything open to interpretation can result in clashes among beneficiaries. To prevent this, make sure your wishes and conditions are clear and direct. Provide an explanation in your will or to your lawyer if you worry that something may be misconstrued.
  4. Controversial requests – Estate executors already have a lot to manage when it comes to fulfilling their duties, and most parties are committed to carrying out a decedent’s wishes properly. Requesting something controversial, hurtful or even unlawful puts them in a very uncomfortable position. Consider carefully what you are asking someone to do when you include problematic requests in a will.

Leaving these elements out of a will can make the administration process less painful and thorny.

How to prepare if you want to sell your business

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Business owners across British Columbia are facing challenges with their business. Some are ready to close that chapter, while others are eager to start a new one. Whatever reason you may have for selling a business, you must plan accordingly.

Like any complicated transaction, selling a business takes considerable preparation. In some cases, business owners start planning years before they actually decide to sell. As such, the sooner you complete the following steps, the better.

Get your paperwork in order

Potential buyers of a Canadian business will likely be interested in everything from the business’ financial information, lease agreements, employment agreements and client lists. If you cannot provide this data readily, you could delay or even prevent a sale.

This information is critical to buyers; having it complete and available when you are ready to sell can have a tremendous impact on a sale.

Consult professionals

You likely know your business inside and out, but that does not necessarily mean you understand the financial and legal demands of selling it.

Therefore, consulting outside parties can be critical. Appraisers can help you land on an accurate valuation; tax and financial advisors can assist with presenting and structuring the sale; a lawyer can draw up and review purchase agreements.

Working with third parties can ensure your business is ready for sale while you stay focused on running it.

Prepare your pitch

Paperwork and data are critical. However, selling a business involves more than numbers and statistics. The presentation from the seller can make or break a potential sale. Everything from the appearance of the workspace to the pitch from sellers can influence buyers.

As such, you can prepare by making necessary repairs and maintenance. You might also review your online presence to see what your buyers may find when they look you up. It can also be important to consider how you will discuss your decision to sell and your responses to known challenges.

Selling a business can be complicated in many ways: financially, emotionally and legally. Because of all that goes into this transaction, owners who anticipate selling in the coming months or years would be wise to take these steps sooner rather than later.

What does “Probate” mean?

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The probate process is when a court declares a will to be valid, and authorizes the named executor to administer the estate. It’s an important step in the estate administration process – but many people may not realize they need to perform this step.

The average person is most likely not familiar with estate laws, as he or she may not have to deal with the loss of life on a daily basis. However, an experienced estate lawyer assists different people with this step regularly, and can provide you with assistance on what happens next after a loved one passes away.

When a loved one dies, the surviving family and friends may think all that needs to be done is to find the will, and then start following the instructions within. However, there’s a slightly more complex process to start administering an estate. Many provisions of a will may require access to assets that only the deceased had control over, such as bank accounts and ownership of physical property.

In order to administer these assets, access has to be given to a trusted individual, known as the executor. For an executor to be given this access, the will needs to be brought before the courts and checked to make sure that it is a legally valid will. This means that the deceased was of sound mind when the will was created, and that the legal requirements – such as the signature of two witnesses – is also provided as well.

Having a court declare a will as valid is known as the probate process. There is a cost involved with the probate process. However, not all situations require that the process need be carried out. As outlined on the Dial-a-law website, instances where an estate is valued at under $25 do not require the probate process. Also, in situations where the ownership of a property is held in joint tenancy – where the right of survivorship would apply – the probate process is also not necessary.

If you have questions about the probate process and what you need to do to administer a will, it’s best to consult with an experienced estates lawyer. He or she will be able to assist you with what needs to be done in your particular situation.

 

I’m the executor of an estate: What does that mean?

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When a loved one passes away, there can be a lot more to deal with than people initially realize. Beyond the emotional toll a loss takes on people, which can be overwhelming, there are also numerous financial and legal details to address.

If you are the executor or administrator of a person’s estate, you will be tasked with the majority of this work. You are the person who will manage the probate process and follow through with your loved one’s wishes, among other duties.

Your responsibilities

More specifically, as an executor, your main responsibilities will include:

  • Locating the will
  • Applying for probate (if necessary)
  • Finding and notifying next-of-kin and beneficiaries
  • Locating the assets and properties named in a will
  • Protecting the deceased’s property until distribution
  • Paying bills and debts
  • Keeping track of your administrative actions
  • Notifying interested parties, like banks and landlords, of the passing
  • Securing property appraisals
  • Arranging and paying for a funeral
  • Distributing property

Possible challenges

With so much on the shoulders of the executor, it is not uncommon for challenges to arise. This might be mistakes or missteps on the part of the executor, or doubts about the executor’s capabilities and decisions by interested parties. These issues could delay the estate administration process or possibly result in requests for a new administrator.

Considering the challenges that may arise, it is important for a person named as an executor to understand that they can consult a lawyer as they navigate this process. This legal guidance and perspective can help to avoid or more easily resolve conflict.

If you are the person creating a will, it can be wise to consider all that an executor or administrator will do before assigning one. Knowing all that this person will do and manage can help you make informed decisions on who may be best suited for the role.

Separating Couples Must Change Their Wills Immediately

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Many couples think that the process of separating from each other will automatically change their wills, powers of attorney, insurance beneficiaries, representation agreements and trusts. It does not. The two ex-spouses are in for a rude shock. If they do not actively change these documents, their ex-spouse will remain the beneficiary of their wills and retain any authority assigned to them in a power of attorney or representation agreement.

This is true even for divorcing couples as far as powers of attorney and other estate planning documents are concerned. Under British Columbia laws will unless the testator ex-spouse clearly states that their divorced spouse is to receive a bequest. But all other documents remain unchanged.

The Two Spouse Problem

This situation becomes even more challenging if the two spouses decide not to get divorced but simply separate as they have no plans to remarry. But what happens if one of the ex-spouses – E – forms a common-law relationship later in life? Then E will have two spouses: the ex-spouse – X – to whom they are legally married, and the common-law spouse – C – they have been involved with for more than two years.

Problems might arise before E’s death if E’s powers of attorney named X as the person with the authority to make decisions if E fell ill or became incapacitated. C would expect to make these decisions but might find that X has the power even though E and X might not have contacted each other for years.

After E dies, C, the common-law spouse, would expect to receive benefits under E’s will and other instruments. But if E and X did not divorce, X would likely remain the beneficiary of the will. X could receive the life insurance monies as well.

C’s only recourse would be to go to court if C and X could not reach an amicable solution. C’s problems could be avoided if E’s will and other documents had been changed when E and X separated.

When Should Changes Be Made?

Separating spouses should make quick changes to their wills, powers of attorney, representation agreements and trusts when they are certain their separation is happening. All that needs to be done is to remove the soon-to-be-ex-spouse from

  • Wills. This ensures the ex-spouse will not be a beneficiary of the will.
  • Insurance beneficiaries. Select another person or name the estate as the beneficiary. The latter ensures that the benefit amount will be distributed according to the will’s terms.
  • Powers of Attorney. Select another trustworthy person to be granted the authority to make decisions in the event absence or incapacity.
  • Representation Agreements. Assign the power to make financial or medical decisions to another trusted person.
  • Trusts. Select another reliable person to act as trustee.

Each ex-spouse can make any additional changes necessary to their wills, agreements and estate plans after the separation details have been finalized.

The impact of separating from a spouse often upsets people so much they don’t think of all the consequences the separation has on their estate plans. During a separation, it is best to consult with experienced wills and estates lawyers. They can assist spouses with making the changes necessary to completely remove an ex-spouse from their legal affairs.

Being an executor involves more than just distributing assets

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If you agree to serve as the executor of someone’s estate, it means taking on immense responsibility. If a friend or family member appointed you to this position in his or her will, it may be to your benefit to carefully consider whether you wish to take on this role now that the individual has passed away before taking any action that could legally obligate you to carry out an executor’s duties.

Distributing property to the heirs and beneficiaries of the deceased is just one of the duties you will undertake. Before making your decision to serve, you may want to know what duties the law here in British Columbia expects you to fulfill. Fortunately, you may enlist help in completing these tasks, but the ultimate responsibility falls to you.

An executor’s duties

As an executor, your responsibilities include the following tasks:

  • You make all the funeral arrangements. You may want to consult with the decedent’s family members and consider his or her wishes as you do so.
  • You must identify, gather and secure all assets of the estate. This may include changing locks on a home or apartment, putting items into storage and ensuring insurance policies remain in place in case of a loss.
  • You need to notify anyone considered an heir or beneficiary of the decedent regardless of whether the deceased named him or her in the will or any other estate-planning document.
  • You must identify all of the estate’s debts and notify all creditors, both known and unknown. If you fail to address a debt of the estate, a creditor could hold you personally liable for the amount owed.
  • You must file any final tax returns of the estate and determine whether estate taxes require payment. Do not make any distributions until you receive clearance from all applicable taxing authorities that no further taxes are due.
  • You need to cancel any credit cards or subscriptions as soon as possible.
  • You will oversee the sale of any estate assets that may be required.
  • You will need to wait at least the minimum amounts of time required by law in order to ensure that no creditor, heir or beneficiary comes forward to make a claim against the estate. Failing to do so could make you personally liable and vulnerable to litigation against you.
  • You will make a final report to the heirs and beneficiaries.
  • You may then distribute the estate’s remaining assets in accordance with the will.

Some assets pass to beneficiaries outside of the probate process such as those held in trust or distributed through a beneficiary designation.

If you decide to undertake the responsibilities of an executor, it may be worthwhile to consult with an experienced lawyer who can help guide and assist you throughout this process in order to ensure that you complete each task to the best of your ability.

Do you have grounds to contest a will?

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Shock, disappointment and confusion may be just a few of the emotions you felt when you learned that your loved one’s will was not what you expected. In fact, perhaps you had seen your parent’s will, and the contents of the will discovered after his or her death was not the same as the one you had read. The sudden and drastic changes in the distribution of your parent’s estate has raised suspicion, and you wonder if you have cause to contest the will in court.

Disputing the contents of a will is a complex and challenging undertaking. After all, your loved one is not present to defend or explain the choices in the will, and the courts tend to assume the will expresses the wishes of the deceased. However, there are some grounds for setting aside the contents of a will.

What will the courts consider?

You may feel that your personal or financial contributions toward your loved one qualify you for a larger inheritance than you received. On the other hand, you may feel that your sibling should receive a smaller share, especially if your parent supported the sibling financially or if the sibling was estranged from the family. Another common situation is when a caregiver inexplicably receives a large portion of the estate.

Any of these or other scenarios may compel you to question the validity of your loved one’s will. However, the courts in British Columbia carefully weigh will challenges using the guidance of the Wills Act. If you choose to dispute your inheritance, the courts will consider these and other questions:

  • Did your loved one understand the terms of the will he or she signed and willingly agree to those terms?
  • Did your loved one know and remember the assets included in the will and the relationships of the people named in the document?
  • Did your loved one suffer from a mental disorder?
  • Did your parent’s poor health make him or her vulnerable to undue influence?
  • Are there suspicious circumstances that suggest someone threatened or coerced your loved one into changing the will?

Some of those suspicious circumstances may include someone isolating your loved one from other family members, secretly changing the will or including terms in the will that seem unnatural or disproportionate.

As a child of the deceased, you have a moral claim to the estate of your parent, and the court has guidelines that address disinherited children and spouses. With the assistance of a legal professional, you may be able to reclaim your fair share of the inheritance.

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