Selling your business, preserving its value
Most owners spend a decade building a company and about six months selling it. The decisions that determine how much of that value you keep are made earlier, often two or three years before a letter of intent is signed.
The Canadian Federation of Independent Business reported in January 2023 that 76 per cent of small business owners planned to exit within a decade. Only nine per cent had a formal succession plan.
A sale is a tax event, an investment event and an estate event at once. Here is what I review with owners well before a deal is on the table.
The exemption comes with conditions
For 2026, the lifetime capital gains exemption is $1,275,000, indexed from $1,250,000 in 2025. It may apply to a gain on shares of a qualified small business corporation. The CRA tests are specific: 90 per cent of asset value used in an active business at the time of sale, at least 50 per cent through the previous 24 months, and ownership by you or a related person over that same period.
Surplus cash, a portfolio account or unused real estate can push a company offside. Correcting that takes time and coordination with your accountant and legal advisor, so the review belongs 24 to 36 months ahead of a sale.
Share sale or asset sale
Buyers often prefer assets. Sellers prefer shares. The exemption is claimed by an individual on a share sale. In an asset sale, the corporation realizes the gain; the exemption is unavailable to you personally, and the proceeds still have to come from the company. Practices are frequently sold as assets, including goodwill, so model both structures after tax before negotiating.
The minimum tax that catches sellers off guard
Claiming the exemption can trigger alternative minimum tax (AMT) in the year of sale, because 30 per cent of the capital gains deduction is added back. MNP has illustrated an AMT of $55,000 to $79,000 for a full claim, with little other income, under the 2024 rules. AMT paid is generally recoverable against regular tax over the following seven years.
The money already inside the company
Refundable dividend tax on hand is recovered only as the corporation pays taxable dividends, so winding up too quickly can leave part of it behind. The capital dividend account may allow the untaxed portion of realized capital gains to be paid out tax free once the balance is confirmed. Spreading distributions across two calendar years can lower the combined bill.
What comes after the deal
The portfolio that carried you to a sale was built for growth. The next one has to produce income for 30 years. Regulated professionals face added limits: in Ontario, all issued shares of a CPA professional corporation must be owned by chartered professional accountants or other CPA professional corporations, which rules out the family ownership structures available to other owners.
I do not provide tax or legal advice. I coordinate the plan around the work your accountant and lawyer are doing, so the investment, income and estate decisions match the deal structure.
Book a year-end planning consultation
If a transition is on your horizon, September is the month to start. Book a complimentary consultation to review the plan before Q4.
Book a complimentary corporate structure review
If you would like to review where your investments are held and whether the structure still fits your plan, I invite you to book a complimentary consultation today.
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If you are a client, thank you for taking the time to read this and I look forward to our next conversation. Please feel free to share this with your friends and family who may be in need of another viewpoint.
Sources
- Canada Revenue Agency. "Line 25400 - Capital gains deduction." Government of Canada, 2026. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-25400-capital-gains-deduction.html
- IE Staff. "Essential tax numbers: updated for 2026." Investment Executive, 2026. https://www.investmentexecutive.com/industry-news/essential-tax-numbers-updated-for-2026/
- O'Sullivan Estate Lawyers. "Update on the capital gains exemption and qualified small business corporation shares." March 2026. https://www.osullivanlaw.com/2026/03/update-on-the-capital-gains-exemption-and-qualified-small-business-corporation-shares/
- Canadian Federation of Independent Business. "Over $2 trillion in business assets are at stake as majority of small business owners plan to exit their business over the next decade." January 10, 2023. https://www.cfib-fcei.ca/en/media/over-2-trillion-in-business-assets-are-at-stake-as-majority-of-small-business-owners-plan-to-exit-their-business-over-the-next-decade
- MNP LLP. "What you need to know about the alternative minimum tax." https://www.mnp.ca/en/insights/directory/what-is-the-alternative-minimum-tax-and-why-am-i-paying-it
- Canada Revenue Agency. "Claiming a capital gains reserve." Government of Canada. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/claiming-a-capital-gains-reserve.html
- Doane Grant Thornton. "What is the Canadian Entrepreneurs' Incentive?" 2025. https://www.doanegrantthornton.ca/insights/whats-the-canadian-entrepreneurs-incentive/
- McBride, Steve. The Retirement Blueprint, Vol. 2: Protecting Wealth. McBride Wealth Management / Ventum Financial Corp., 2025.
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