How a sale is taxed can change your take-home proceeds substantially, which is why the smartest owners bring in a tax advisor long before they sign anything. A few structural questions tend to drive most of the outcome.
This is general education, not tax advice. Tax rules change and depend on your specific situation — confirm everything below with a qualified Canadian accountant or tax advisor before you act.
Share sale vs asset sale
In a share sale you sell the company's shares; in an asset sale the company sells its assets and you keep the shell. Sellers often prefer a share sale for its tax treatment, while buyers often prefer an asset sale for theirs. Where you land is part of the negotiation, and it has real tax consequences for both sides.
The lifetime capital gains exemption
Canada offers a lifetime capital gains exemption on the sale of qualifying small-business corporation shares, which can shelter a meaningful amount of the gain from tax. The exact exemption amount is indexed and has changed in recent years, so treat any figure you read — including ones quoted elsewhere on this site — as a number to confirm with your advisor against the current year's rules. Eligibility also has conditions that must be met well before a sale.
Why timing and structure matter
- Some exemptions require the share and corporate structure to qualify for a period before the sale — planning late can disqualify you.
- How proceeds are paid (lump sum vs earn-out vs vendor financing) affects when and how you are taxed.
- Provincial rules and your personal situation change the picture.
The single most valuable move here is early advice. A conversation with an accountant a year or two ahead of a sale routinely pays for itself many times over.