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Will Your Small Businesses Go Out of Business?

As of September 2021, approximately 473,000 small businesses were operating in Ontario, according to the Government of Ontario’s Small Business Profile. These small businesses employ nearly 2.5 million people in the province, accounting for over 98% of all businesses in Ontario and approximately 30% of all private-sector employment in the province.

If you are a small business owner, consider what could happen to your business if you die or become incapacitated. In this post, we are going to discuss several issues that can come up with small businesses and their owners:

  • How can a buy/sell agreement help keep your business in business?
  • What if you become incapacitated?
  • How can key man insurance help your business and your family?
  • Must you hire a lawyer to administer the Estate?
  • If an Executor doesn’t want to hire a lawyer, is there any other way to get help?


Q. What is a buy/sell agreement?

A buy-sell agreement for a business is a contract that comes into play when one of the owners dies. Under such a contract, the decedent’s business partners offer a previously agreed-upon price for the decedent’s share of the business, and the Executor must accept the payment and sign the papers required to close the transaction. Without this contract, the decedent’s share in the business would pass to someone else according to his/her Will or Trust, or the Executor could sell it to the highest bidder, just like any other property.

Q. What if you become incapacitated?

A Power of Attorney for Property allows you to appoint someone to make business decisions on your behalf when you can’t. You may want to make a separate Power of Attorney specifically to appoint someone to manage your business affairs. And then someone different to manage your personal business affairs. If you have a living trust, make sure your interest in the business is titled in the name of the trust. The trustee may be able to manage the business without involving the Probate court.

Q. How can keyman insurance help your business and your family?

Some companies purchase a keyman insurance policy to help buy the business if one of the owners dies. Keyman life insurance works like individual life insurance – when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout.

The keyman insurance proceeds can be used to pay off debt, find a replacement for the deceased, buy out the deceased’s shares in the company (buy-sell agreement), or even help to supplement the income of the deceased’s family.

If you purchase keyman insurance, ask your advisors if the proceeds will be included as part of the decedent’s taxable Estate. If subject to the Estate tax, currently 45% of the value will be owed for Estate taxes.

Q. Must you hire an attorney to help administer an Estate?

An attorney with particular knowledge of Estate Laws and processes can help (and in some cases must help) the Estate representative who will also administer the Estate. If a normal Probate process is required, some Provinces require a lawyer to complete and file the Probate forms with the court.

The Executor or Trustee named in the Will has the legal right to hire the lawyer of their choice unless the deceased has specified in their wishes that a specific lawyer be utilized.

Before hiring a lawyer, be clear on the fees he or she is going to charge the Estate for their services. The laws in the province where the Probate case is filed determine whether the lawyer can charge the Estate reasonable fees, which is usually some type of hourly fee, or whether the lawyer can charge fees based upon a certain percentage of the gross value of the Probated Estate.

Ontario statutes allow attorneys to charge fees based upon a certain percentage of the Probated Estate. If the decedent’s personal residence is a Probate Estate with a fair market value of $2 million, the statute allows lawyers to charge a fee of $33,000 or 1.5% for settling the Estate, unless the Executor makes a written agreement calling for less.

Q. If an Executor doesn’t want to hire a lawyer, is there any other way to get help?

There are various self-help resources to help an Executor settle the Estate.

Here are some resources:

  • Web sites on Will and Estate Planning like www.Smartwills.ca. Some provinces and local municipalities include information about Probate forms and Probate laws on their website.
  • Probate Courts. Probate court clerks will generally answer basic questions about court procedure, but they staunchly refrain from saying anything that could be construed as “legal advice.” Some courts, however, have lawyers on staff who examine documents filed in Probate proceedings (sometimes called “Court Examiners”); they may identify deficiencies and/or errors in the papers and explain how to correct them.

If the Estate representative is paid for serving as an Estate representative, these fees are income and must be reported on their tax return. The process of managing a small business after the owner’s death can be complex, and it may be advisable to seek the assistance of a lawyer or accountant to help with the transition. Some of the key steps that may need to be taken include:

  1. Identifying the business assets and liabilities
  2. Assessing the value of the business
  3. Deciding whether to continue operating the business or wind it down.
  4. Identifying potential buyers or successors (if the business will continue)
  5. Managing the business finances and paying any outstanding debts or taxes
  6. Distributing the proceeds of the sale or winding down of the business to the beneficiaries named in the Will or the deceased person’s next of kin.

It’s important to note that the specific steps that need to be taken will depend on the unique circumstances of each case. A lawyer or accountant with experience in Estate administration and small business management can provide guidance on how to proceed.


Whether or not you need to hire a lawyer in Ontario if someone has died will depend on the circumstances surrounding the death and the specific legal issues that may arise. Generally speaking, if the deceased person had a Will, it may be advisable to hire a lawyer to assist with the administration of the Estate.

In Ontario, the process of administering an estate involves several steps, including:

  1. Applying for a Certificate of Appointment of Estate Trustee (also known as Probate)
  2. Identifying and gathering the deceased person’s assets and liabilities
  3. Paying any outstanding debts and taxes
  4. Distributing the remaining assets to the Beneficiaries named in the Will (if there is one) or to the deceased person’s next of kin (if there is no Will).

An experienced Estate Planning lawyer can help you navigate this process and ensure that you comply with all applicable legal requirements.

If the deceased person did not have a Will, there may still be legal issues to address, such as determining who is entitled to inherit the Estate under Ontario’s intestacy laws. In this case, it may also be advisable to hire a lawyer to assist with the Estate administration.

Overall, while it is not always necessary to hire a lawyer in Ontario if someone has died, doing so can be beneficial in ensuring that the deceased person’s wishes are carried out and that any legal issues are handled properly.



Want more information?

Are you interested in a consultation with Peter R. Welsh?
Contact me at Peter@SmartWills.ca
By telephone 416-526-3121
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This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.