Do I Pay Tax When I Sell My Business in Ontario, and Can I Use the Lifetime Capital Gains Exemption?

You may owe tax on the gain when you sell your business, but the lifetime capital gains exemption can shelter some or all of it if you are an individual selling qualified small business corporation shares. For 2025 the limit is $1,250,000, so the maximum deduction is $625,000, which is 50% of that limit. The same $1,250,000 limit applies to dispositions after June 24, 2024.

To qualify, the shares must be shares of a small business corporation that you own at the time of sale. No one other than you or a related person or partnership can have owned them for the 24 months before the sale, and throughout that time more than 50% of the corporation's asset value must have been used mainly in an active business in Canada. At the time of sale the corporation must also be a Canadian-controlled private corporation with 90% or more of its asset value meeting the active-business tests.

The exemption does not apply to a corporation that sells its own business assets, because that gain belongs to the corporation. Whether you qualify depends on your facts, so confirm with a lawyer or accountant before you sign.