- Buyers and their advisors will look hard at your financial statements, and small businesses often carry expenses that make sense for tax purposes day-to-day but distort what the business…
- Whether a deal is structured as a share sale or an asset sale has significant tax consequences that are far easier to plan for in advance than to fix after a letter of intent has already…
A business sale runs on two parallel tracks — the legal track, which your lawyer manages, and the financial and tax track, which belongs to your accountant. Owners sometimes bring an accountant in only once a buyer is at the table, to review deal numbers as they come up. Bringing one in earlier, before you’ve even started actively marketing the business, usually pays for itself many times over.
This isn’t about replacing your lawyer’s role; it’s about making sure the tax and financial groundwork is in place before a deal starts moving, so you’re not trying to restructure things a lawyer can’t fix after a term sheet is already on the table.
This article covers what an accountant should help you prepare before a sale process starts, and how that work fits alongside what your lawyer does.
Dividing the Work: Accountant vs. Lawyer
| Task | Typically the accountant’s role | Typically the lawyer’s role |
|---|---|---|
| Financial statement quality | Preparing and normalizing statements | — |
| Tax structuring (share vs. asset) | Modelling the tax consequences of each structure | Drafting the agreement to reflect the chosen structure |
| Lifetime Capital Gains Exemption planning | Assessing whether shares may qualify, planning ahead of a sale | Reflecting the agreed structure in the purchase agreement |
| Working capital target | Setting and calculating the target and adjustment mechanism | Drafting the purchase-price adjustment clause |
| Purchase agreement terms | Advising on the tax impact of specific clauses | Negotiating and drafting representations, warranties, and indemnities |
| Post-closing tax filings | Filing elections, such as a GST/HST joint election, and final returns | Ensuring closing documents support the elections made |
Getting Your Financials Sale-Ready
Buyers and their advisors will look hard at your financial statements, and small businesses often carry expenses that make sense for tax purposes day-to-day but distort what the business actually earns for a buyer’s analysis — personal expenses run through the company, one-time costs, above-market family compensation. An accountant can help normalize these figures into a clearer picture of true operating profitability, which is often the single biggest factor in how a buyer values the business.
Tax Structuring Before You Sign Anything
Whether a deal is structured as a share sale or an asset sale has significant tax consequences that are far easier to plan for in advance than to fix after a letter of intent has already set expectations. If you’re an individual shareholder, your accountant can also help assess whether your shares might qualify for the Lifetime Capital Gains Exemption on a sale of qualifying small business corporation shares. This benefit generally applies to individual shareholders on qualifying share sales, not to a corporation’s own sale of its assets, and it depends on tests that are genuinely fact-specific. This kind of qualification review takes real lead time; it isn’t something to start once an offer is already on the table.
Working Capital and Purchase Price Mechanics
Most purchase agreements adjust the final price based on a working-capital target, comparing an estimated closing statement to a final, post-closing statement. Your accountant should help you understand what a normal working-capital level looks like for your business before a buyer’s advisors propose their own number, since the target itself is often as heavily negotiated as the headline purchase price.
When to Bring the Accountant and Lawyer Together
Your accountant and lawyer should be talking to each other directly at key points — when the deal structure is chosen, when the purchase agreement’s tax-sensitive clauses are drafted, and when closing mechanics, including any GST/HST election, are finalized. Relaying information between them through you as the owner is slower and more error-prone than letting them coordinate directly.
A Pre-Sale Accountant Checklist
- [ ] Financial statements reviewed and normalized for one-time or personal items
- [ ] Share vs. asset sale tax consequences modelled for your specific situation
- [ ] Lifetime Capital Gains Exemption qualification assessed, if you’re an individual shareholder
- [ ] A realistic working-capital baseline calculated ahead of negotiations
- [ ] Corporate structure reviewed for any changes worth making before a sale, not after
- [ ] A plan in place for coordinating directly with your lawyer once a deal is moving
Frequently asked questions
Can my regular bookkeeper handle this, or do I need a specialist?
A day-to-day bookkeeper may not have experience with sale-specific issues like earnings normalization, LCGE qualification, or working-capital mechanics — look for an accountant with actual transaction experience, not just general small-business accounting.
When exactly should I bring my accountant in?
Earlier than most owners think — ideally well before you’re actively marketing the business, since tax structuring and LCGE qualification planning both benefit from lead time that isn’t available once a deal is already moving.
Does the Lifetime Capital Gains Exemption apply automatically if I sell my shares?
No — qualification depends on several fact-specific tests about the corporation and how it’s been used, and it applies to individual shareholders on qualifying share sales, not automatically or to every sale. This needs a specific review with your accountant, not an assumption.
What if my accountant and my lawyer disagree on deal structure?
This happens, since they’re weighing different considerations — tax efficiency versus liability exposure and closing mechanics, for example. The right answer is usually a direct conversation between the two of them and you, not a decision made without both perspectives.
This is a business purchase or sale question
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