Do I need to fix HR problems before I even start planning a sale?

It's worth addressing significant HR problems before a sale, though "before you even start planning" is earlier than strictly necessary — you can begin planning while working through them in parallel. What matters is that unresolved HR issues, such as improperly classified employees, unpaid overtime or vacation pay, missing employment contracts, or an unaddressed harassment complaint, tend to surface during due diligence and become a buyer's problem to price in, usually to your disadvantage.

The nuance many owners miss is how employee treatment actually works on a sale. Under the Employment Standards Act, if the business is sold as a going concern and the buyer hires your employees, their employment is generally treated as continuous rather than ended — prior service counts toward their entitlements with the new employer. That continuity doesn't erase existing problems, though; an employee with a valid unpaid-wages or termination claim against the business as it stands today can still bring that claim regardless of who owns the business next.

Getting an honest employment-law review done early — ideally before you're in active discussions with a buyer — lets you fix what can be fixed and be prepared to explain what can't, rather than discovering both at once during due diligence.