A business sale is likely the largest financial transaction of your life. Without planning ideally 1–3 years in advance, you pay far more tax than necessary.
Asset Sale vs. Share Sale
Asset sale: Individual assets sold; proceeds taxed as business income or capital gains. Generally preferred by buyers.
Share sale: Corporation shares sold; capital gains treatment applies and the Lifetime Capital Gains Exemption (LCGE) may shelter $1,250,000 tax-free per seller. Generally preferred by sellers.
The LCGE: Up to $2.5M Tax-Free per Couple
For Qualifying Small Business Corporation shares, each seller can claim up to $1,250,000 of capital gains tax-free. For a couple each owning shares, this doubles to $2,500,000 — one of the most powerful tax planning tools available.
LCGE Qualification Conditions
- Corporation must be a CCPC at time of sale
- 90%+ of assets used in active business at sale
- 50%+ of assets used in active business for prior 24 months
- Shares held for 24 months
Key Planning Steps 1–3 Years Before Sale
- Review share structure for LCGE multiplication opportunities
- Purify the corporation of excess cash/investments
- Confirm ownership period requirements are met
- Engage business valuator and M&A legal counsel