A buyer's offer is only one part of what you'll keep. The sale structure, company records and your own tax history can change the result. Some of the evidence reaches back years, so preparation belongs before an offer arrives.
Establish what the buyer would acquire
In a share sale, the shareholder sells shares. In an asset sale, the business sells assets such as equipment, inventory or goodwill. Who receives the proceeds and how they're taxed differ. The purchase agreement's allocation and the cost of moving proceeds from the company to the owner belong in the comparison.
Source: CRA: selling a business.
Ask for after-tax proceeds under both structures, including debt, transaction costs, holdbacks and any payment spread over time. A larger headline price doesn't necessarily leave you with more usable cash at closing.
Check share-sale eligibility and its history
The lifetime capital gains exemption may apply to an individual's gain on qualified small business corporation shares. Being incorporated for two years doesn't establish eligibility.
- At the sale, the corporation must meet the small business corporation asset test. CRA generally describes this as at least 90% of asset fair market value in qualifying active-business assets or qualifying connected-company shares or debt.
- During the relevant portion of the preceding 24 months, the corporation must be a Canadian-controlled private corporation and more than 50% of asset fair market value must meet the qualifying test.
- The shares also need the required 24-month ownership history. Share issues and reorganisations can need special review.
Current book values alone don't establish these tests. Cash, investments and property need analysis of their use and fair market value over the relevant periods.
Source: CRA: qualified small business corporation shares and small business corporation definitions.
Build the records file
- Company minute book, share register, issue and transfer dates, shareholder agreements and ownership chart.
- Share purchase and reorganisation documents, elections, valuations, adjusted cost base and paid-up capital support.
- Financial statements, corporate returns and general ledgers covering at least the relevant 24-month period, plus earlier records needed to establish share and tax history.
- Asset lists and evidence of business use, supported fair market values, investment statements and the reasons cash was held in the business.
- Corporate tax-account continuity, shareholder-loan records, and prior dividend and capital-dividend documentation.
- Each proposed seller's tax residence, previous capital-gains deduction claims, loss history and cumulative net investment loss information.
- Loan and security documents, material contracts, leases and any draft offer, letter of intent or purchase agreement.
Keep the evidence behind a balance, including records from earlier accountants. Rebuilding it after a buyer sets a closing date can leave gaps that a new balance sheet won't answer.
Source: CRA: capital-gains records and deduction requirements.
Model the tax and the timing
A potential capital-gains deduction doesn't establish a tax-free sale. The seller's available deduction, prior claims, losses, other income and transaction details still need review. Alternative minimum tax may also affect the cash needed in the year of sale.
Source: CRA: minimum tax.
Model each seller separately. Don't multiply a headline exemption by the number of family members and treat the result as confirmed relief. Ownership, eligibility and the seller's history have to support each claim.
If excess investments or cash may affect eligibility, review possible steps with the accountant and lawyer before moving them. A last-minute transfer can create its own tax and legal consequences and may not fix the historical test.
Bring the review forward
A planned exit in the next few years, a new shareholder, a major asset purchase or a growing investment portfolio is a reason to review the records now. Once a buyer is involved, share the proposed structure before signing terms that limit your choices.
General preparation guidance for Canadian private-company owners, checked against the linked CRA sources on September 6, 2026. This checklist doesn't confirm exemption eligibility, available relief or a transaction structure. A sale requires a review of the facts and rules in force at the transaction date.
Prepare the business before the offer.
Tell us about the sale or succession you're considering. We'll discuss the records and planning work it needs.