Is it better to sell shares or assets of my business in Ontario for tax purposes?

Sellers and buyers usually want opposite structures: a share sale can let an individual seller use the lifetime capital gains exemption, while buyers often prefer an asset purchase. An individual who sells qualified small business corporation shares may claim the capital gains deduction, which is $1,250,000 of gains for dispositions after June 24, 2024. Only one-half of a capital gain is taxable.

In a share purchase, the buyer buys the corporation itself and the tax values of its assets do not change, whereas in an asset purchase the buyer records each asset at its allocated cost, which is why buyers often prefer assets. A share purchase is generally not subject to GST/HST, while an asset purchase can be, unless the parties elect. On an asset sale, recaptured depreciation is included in the seller's income in full.

Whether your shares qualify for the exemption, and how land transfer tax applies if real property is involved, depends on the facts. Because the best structure for one side can cost the other, get legal and tax advice before you agree on it.