How to Sell Your Canadian Business
Selling a business is a big decision. For Canadian business owners, the process involves unique steps around taxes, regulations, and valuation. Knowing what you want from the sale will help guide your choices – whether that means maximizing profit, protecting employees, or finding a buyer who will carry on your vision.
Key Differences in Selling a Business in Canada vs. the U.S.
If you’re a Canadian business owner, the sale process has some unique considerations compared to U.S. deals.
- Taxes: Canada has the Lifetime Capital Gains Exemption (LCGE) for qualifying small business corporation shares. As of 2024, the exemption is $1.25 million, indexed to inflation. The United States doesn’t have this.
- Legal structure: Canadian provinces (like Quebec, Ontario, and Alberta) each have their own business laws. Working with a lawyer who understands your province is essential.
- Currency: U.S. buyers will factor in exchange rates when making offers or pursuing a business for sale in Canada. These rates fluctuate, and it can influence demand.
- Private equity: It’s more common in the U.S. than it is in Canada. Canadian sellers lean more toward individual and family buyers.
A business for sale in Toronto might draw buyers with different interests (and require different planning) than one in New York or Chicago.
Legal and Regulatory Considerations in Canada
Selling a Canadian business comes with rules—both federal and provincial.
- Canada Revenue Agency (CRA): Handles tax reporting, capital gains tax, and Goods and Services Tax (GST)/Harmonized Sales Tax (HST) filings. You’ll need to report the sale properly and close CRA accounts (business number, payroll, GST/HST) after the sale.
- GST/HST: Depending on how the deal is structured, GST or HST may apply to all or part of the transaction. Share sales are generally exempt, while asset sales usually attract GST/HST. There’s also an election (Form GST44) to avoid GST/HST if the buyer acquires substantially all assets (90%+).
- Purchase agreement: This final contract outlines terms, price, and responsibilities.
- Liabilities: Know what stays with you and what transfers to the buyer.
- Provincial regulations: In provinces like Quebec or British Columbia, specific licensing or registration rules may apply when changing business ownership.
Planning an Exit Strategy
Having an exit mindset, even if you’re not selling soon, helps increase the value of your business over time. Unfortunately, many entrepreneurs don’t think about leaving until they’re already tired, and that’s usually too late. A well-timed departure starts with an exit plan.
Think about:
- When you want to leave
- Who might want to buy the business (think: family, competitors, private equity)
- How involved you want to be after the sale
- What the business needs to look like to attract buyers
Building a Team: Accountant, Lawyer, Business Broker
The right help can make or break a sale. Assembling a team that can handle the details makes it easier for you to focus on the big picture.
- Accountants will clean up financial statements, fix reporting issues, and advise you on tax implications of selling your business. If you want to avoid surprises during due diligence, finding an experienced accountant is invaluable.
- Lawyers protect your interests. They’ll review contracts, help with the purchase agreement, and handle anything related to liabilities and legal risk.
- Business brokers are like matchmakers. They market your business for sale, screen potential buyers, and guide you through the sales process. In Canada, brokers often handle buyer qualification and charge fees ranging from 4%-12% of the sale price. A good business broker might have access to networks across Ontario, British Columbia, Alberta, and other parts of Canada.
Valuing the Business for Sale
What’s your business worth? Business valuations vary based on earnings, assets, and buyer interest.
A proper business valuation gives you a starting point for setting your purchase price. It also helps with negotiations and foster buyer trust.
Common ways to find the value of your business.
- Cash flow-based valuation: The Discounted Cash Flow (DCF) method looks at past and expected profits.
- Asset-based valuation: Focuses on what the business owns, including equipment, inventory, or real estate.
- Market approach: Compares your business to others recently sold in Canada, often using EBITDA multiples (earnings before interest, depreciation, and amortization).
Preparing a Business for Sale
Before listing your business, take time to make it more marketable and attractive to buyers. Some areas to focus on:
- Financial cleanup. You’ll need clear, accurate financial statements to build trust and speed up due diligence.
- Remove key man risk. Set up systems so you can show that your business runs without you.
- Eliminate hidden liabilities. Fix legal or tax problems early.
- Document everything. And we mean everything. Contracts, intellectual property, inventory lists should all be in order.
- Set the asking price. Make sure your price is based on a realistic valuation.
- Decide on sale structure. Choose between an asset sale vs. share sale. The experts you consult with can help you break it down.
Once you’re ready, your business will be easier to sell, and more likely to sell at a fair price.
Marketing Your Business to Canadian and International Buyers
A well-marketed business creates competition, and in turn, it can drive up the sale price.
Some buyers come through personal networks. Others come through listings or broker connections. To attract qualified prospective buyers, you'll need to get the word out strategically.
- List your business for sale on BizBuySell.
- Tap into your broker’s network, especially in major cities like Calgary or Toronto.
- Reach out to competitors or suppliers who might want to expand.
- Consider international buyers, especially if your business is in e-commerce or tech.
- Protect your confidentiality. Not everyone needs to know you’re selling.
Ready to Sell Your Canadian business?
Start your listing today on BizBuySell and connect with qualified buyers across Canada and beyond.
FAQ Section
1. Do I pay GST or HST when selling my business in Canada?
It depends on the sale structure. Share sales are generally exempt, while asset sales usually attract GST/HST. You may be able to file Form GST44 to avoid GST/HST if the buyer acquires substantially all assets.
2. What is the Lifetime Capital Gains Exemption in Canada?
The LCGE allows qualifying small business owners to shelter up to $1.25 million (as of 2024) in capital gains from tax when selling shares of a Canadian-controlled private corporation.
3. How long does it take to sell a business in Canada
Most sales take 6–12 months, but complex deals can take longer. Preparing financials and legal documents early can speed up the process.
4. Do I need a business broker in Canada?
Not always, but brokers can help market your business, qualify buyers, and negotiate terms. Fees typically range from 4%–12% of the sale price.