Succession planning and tax strategy for construction business owners
*Article sponsored by MNP
Often overlooked, tax planning is a critical piece of the succession planning process that can make all the difference – for your future, and your business’ – when you’re ready to step away.
As Canada’s construction industry faces a generational shift, succession planning has become a defining challenge – and opportunity – for business owners.
Whether your transition is coming soon or still years away, the choices made now will shape your retirement, your finances, and your peace of mind for many years to come.
In Preparing for the Next Chapter in Construction: 2025 MNP Report we outline responses from 191 business owners who took part in an online survey in the fall of 2024. The findings illustrate how owners are preparing, or not preparing, for succession and highlight the growing need for thoughtful, strategic succession plans among Canada’s construction industry.
The succession planning gap
Despite nearly a third of construction owners planning to transition ownership within the next five years, less than 30 per cent have a formal succession plan in place. Of those already thinking about transition, only 23 per cent have an emergency plan for an unplanned exit, and 62 per cent haven’t taken tax-planning steps to ensure a smooth business transition and maximize their income.
The top considerations among respondents when creating a transition plan include:
- Financial planning (70 per cent)
- Tax planning (67 per cent)
- Identifying the right successor (62 per cent)
- Understanding financial requirements for retirement (42 per cent)
Of the 70 per cent of owners surveyed who said they don’t have a succession plan, more than one-quarter said they simply hadn’t considered it. Another 14 per cent said they don’t think they need one and 13 per cent assume a family member will take over the business. This data illustrates the lack of awareness around the importance of a thoughtful succession plan and the role it plays in the success of the business moving forward and an owner’s own retirement.
The tax implications of not planning effectively
Without a clear succession plan in place, you could see lower valuations or difficulty attracting the right buyers. You might also set up your successor for a struggle if they are unprepared and run into issues with clients, employees, or suppliers.
But the biggest loss might come from overlooking how closely tied tax and succession planning are.
Proactive tax planning can prevent losing significant value during a transition – whether you’re selling to a third party, passing to family, or transferring to employees.
Tax strategies can help owners:
- Maximize tax liabilities on the sale or transfer of the business
- Structure buyouts to maximize after-tax income
- Take advantage of available tax credits and exemptions
Many owners assume succession will be straightforward, but failing to plan for tax implications can result in unexpected tax bills that eat into retirement income, lower business valuations, and missed opportunities for savings.
Planning ahead to secure your future
While nearly all business owners surveyed (94 per cent) regularly assess cashflow and economic conditions, only 55 per cent consider their succession planning with the same frequency.
Across the board, construction business owners are losing sight of the value of taking a proactive approach to succession planning, risking years, or even decades, of hard work and legacy building in the process.
Exiting your business is one of the biggest milestones in your personal and professional life and your business’s long-term success depends on the steps you take today to plan for the future.
Wherever you’re at in the succession planning process, there are a few key things to consider:
- Start early: The sooner you begin, the more time you’ll have to prepare candidates and improve business value.
- Get professional help: Advisors can guide you through the tax, legal, and operational complexities of succession planning to ensure a smooth transition.
- Make it official: Document your plan, communicate it, and revisit it regularly as your goals and market conditions evolve.
Download Preparing for the Next Chapter in Construction: 2025 MNP Report today to learn more about our survey findings and for key tips and takeaways on how best to prepare your business for transition.