Selling a Business in Ontario: Step-by-Step Process

Selling a business is rarely a single event. It is a series of decisions and documents, usually spread over several months, and the order in which you do things matters.

This article walks through the usual stages for an Ontario owner, from preparing to closing and what comes after. Your structure and your buyer will change the details, so treat it as a map and confirm the specifics with a lawyer and an accountant.

Step 1: Decide whether you are selling shares or assets

In a share sale, you sell your shares in the corporation and the buyer steps into ownership of the company. In an asset sale, the corporation sells the business assets itself. The choice affects your tax, the approvals you need and the paperwork.

If you are an individual selling qualified small business corporation shares, you may be able to claim the lifetime capital gains exemption. For 2025 it is $1,250,000, so the maximum deduction is $625,000. The exemption is available only to an individual selling shares; when the corporation sells its business assets, the gain belongs to the corporation and the exemption does not apply to it directly. The dollar limit changes over time, so confirm the current figure before you plan around it.

To qualify, the shares generally need to meet these tests:

• The corporation must be a small business corporation: a Canadian-controlled private corporation whose assets are 90% or more in active-business use or ownership at the time of sale.
• Nobody other than you or a related person or partnership can have owned the shares for the 24 months before the sale.
• Throughout those 24 months, more than 50% of the fair market value of the assets must have been used mainly in an active business in Canada.

Step 2: Prepare the business and its records

Buyers will review your finances, contracts, employees and corporate records. Sellers who have these organized usually negotiate from a stronger position and face fewer late surprises. This is also the time to talk with your accountant about tax planning, because some qualifying tests look back over a period before the sale.

Before you share employee or customer information with a possible buyer, put a confidentiality agreement in place. Personal information can be disclosed for a prospective transaction without consent only if the parties agree the recipient will use it solely for the transaction, protect it, and return or destroy it if the deal does not proceed.

Step 3: Negotiate and sign the agreement

Most sales start with a letter of intent and then move to a detailed purchase agreement. If the price is paid partly after closing, a vendor take-back arrangement can matter for both tax and security. Where part of the price is not payable until after the end of the tax year, you may claim a reasonable reserve, but at least one-fifth of the gain must be included each year, so the gain is generally taxed over no more than five years. If you sell qualifying shares to your child who was resident in Canada, that can stretch to as many as 10 years.

If you take back a loan, registering a financing statement under the Personal Property Security Act perfects your security interest in the collateral. A seller who does not register may rank as an unsecured creditor if the buyer becomes insolvent.

If the corporation is selling all or substantially all of its property outside the ordinary course, the Business Corporations Act requires shareholder approval. That approval is by special resolution, meaning at least two-thirds of the votes cast at the meeting or a resolution signed by all voting shareholders. Shareholders entitled to vote may dissent and seek to be paid fair value.

Step 4: Close the deal

Closing is where the tax and filing details show up. Common ones include:

• GST/HST on an asset sale: the seller and buyer may jointly elect so that no GST/HST is payable on the transfer, using CRA Form GST44, where the buyer acquires all or substantially all of the property reasonably needed to carry on the business.
• Limits on that election: it is not available where the seller is a GST/HST registrant and the buyer is not. Tax still applies to some services, taxable leases and licences, and, where the buyer is not a registrant, taxable sales of real property.
• Non-resident sellers: a non-resident selling taxable Canadian property must send the Minister a notice by registered mail no later than 10 days after the sale. A buyer can be liable for 25% of the excess of cost over the certificate limit unless a certificate was issued or the buyer reasonably had no reason to think the seller was a non-resident.
• Foreign buyers and very large deals: a non-Canadian making a notifiable investment must notify the Director before implementation or within thirty days afterward. Large transactions may also need advance notice to the Competition Bureau.

After closing, and what to do next

If the buyer employs your staff, the sale does not end their employment. The buyer is treated as the employer and length of service with you carries over for entitlements such as vacation, notice of termination and leave eligibility. That does not apply if the buyer hires the employee more than 13 weeks after the earlier of the employee's last day with you or the day of the sale. After a share sale, new directors or officers must be reported within 15 days through Form 1, Initial Return/Notice of Change.

• Ask your accountant whether a share sale or an asset sale suits you better.
• Gather corporate, tax, contract and employee records early.
• Sign a confidentiality agreement before sharing sensitive information.
• Have a lawyer review the letter of intent and the purchase agreement before you sign.
• List the approvals, elections and filings your deal will need, with owners and dates.

Frequently asked questions