Every business changes hands. Plan how yours does.

When two or more people own a corporation, the shareholder agreement is the succession plan. It should say what happens if an owner dies, becomes disabled, retires or wants to leave, how the shares will be valued and how the purchase will be paid for.

Families in business together face the same questions, often with more emotion. Siblings who inherit equal shares but play different roles can find co-ownership difficult without clear rules.

Insurance can also be owned in shared arrangements. In a shared ownership policy, a corporation and an individual each own a defined part of the same policy. These arrangements can be useful, but they must be structured carefully to avoid unintended tax consequences, such as a taxable benefit to the individual.

Passing a business to children is rarely a single transaction. It usually unfolds over years: a freeze to shift future growth, gradual changes in management, and a plan for the value the parents still hold.

An estate freezeestate freezeA reorganization that locks the current value of a business into fixed-value shares held by the owner, so that future growth accrues to new shares held by the next generation or a family trust. can cap the tax owed at the owner’s death at today’s value, while new shares let the children, or a family trust, benefit from future growth. Parents can keep control through voting shares for as long as they choose.

The rules for selling a business to family members have changed in recent years. Specific conditions must be met for a sale to a child’s corporation to be taxed like a sale to an unrelated buyer, and the lifetime capital gains exemption may be available on qualifying shares, depending on the business and the timing.

Insurance can fund the tax that remains on the frozen value, so the children are not forced to sell or borrow to keep the business.