Do I have to pay tax when I sell my business in Ontario?
Usually yes: selling a business can create a capital gain, and the tax depends on how the sale is structured and who sells. An individual who sells qualified small business corporation shares may claim the lifetime capital gains exemption, which for 2025 is $1,250,000, giving a maximum deduction of $625,000. That figure applies to dispositions after June 24, 2024.
The shares must meet tests, including being owned by you or a related person or partnership for the 24 months before the sale. If the corporation itself sells its business assets, the gain belongs to the corporation and the share exemption does not apply to it directly. If part of the price is paid after the tax year ends, you may claim a reserve that generally spreads the gain over no more than five years. Sales of qualifying shares to a child resident in Canada can stretch that to 10 years.
Because the rules turn on the structure and your facts, talk to an accountant before you sign a letter of intent or purchase agreement. A lawyer can then make sure the agreement matches the tax plan.
Key takeaways
- The lifetime capital gains exemption is for an individual selling qualifying shares, and for 2025 it is $1,250,000, with a maximum deduction of $625,000.
- The shares must be shares of a small business corporation that meets the 90% test at the time of sale, plus the 24-month ownership and active-business tests.
- The deduction can be denied where a significant part of the gain is reasonably attributable to unpaid or low-paid preferred share dividends.
- A non-resident seller of taxable Canadian property must send the Minister a notice by registered mail no later than 10 days after the sale.