Most business owners carry a quiet assumption: one day they’ll sell the business and retire on the proceeds. It’s a comforting plan — and for most owners, it’s unlikely to play out the way they imagine. In an interview, Michael Baker, CPA, laid out the math, and what to do about it.
The math most owners never run
Surveys consistently show a large majority of Canadian owners intend to sell within about five years. But the number of businesses that actually change hands each year is a small fraction of that — far more owners want out than there are completed deals. The “golden egg at the end” that’s supposed to fund retirement often simply isn’t there. That’s not doom; it’s reality, and reality is something you can plan around.
Why selling is so hard
- Most of an owner’s net worth is locked in a single, illiquid asset — the company.
- There’s often no buyer at the price the owner has in mind.
- There’s no written plan, so a sale (or a forced exit through illness or death) becomes a scramble.
Mike has seen the worst version of this repeatedly: owners fire-selling because they need the cash and have no plan — which only drives the price down further.
The tax trap waiting at the finish line
Even when a sale happens, tax can take a big bite — unless your shares qualify for the Lifetime Capital Gains Exemption (LCGE). For 2026, the LCGE can shelter roughly $1.25 million of capital gains (now indexed to inflation) on the sale of Qualified Small Business Corporation (QSBC) shares. The catch is in the word qualified.
A quick example
You sell your company shares for a $1.25M gain. If the shares qualify as QSBC, the LCGE can shelter essentially all of it — potentially saving you in the range of $300,000+ in tax. But if your company is stuffed with passive assets — excess cash, an investment portfolio, real estate not used in the business — the shares may not qualify, and you could pay tax on the full gain. The difference between “qualified” and “not” can be hundreds of thousands of dollars.
To qualify, broadly: you must have held the shares for at least 24 months, at least 90% of the company’s assets must be used in an active business at the time of sale, and more than 50% throughout those 24 months. “Purifying” a company — moving passive assets out, often into a holding company — to meet those tests takes time. You cannot do it the week a buyer appears.
What to do instead
- Be intentional. Build a business that runs and profits without relying on the sale. Owners who truly understand their financial drivers often make more now — and the sale becomes a bonus, not the whole plan.
- Agree a valuation method early, in a shareholders’ agreement, so you’re not negotiating from zero at the worst possible time.
- Plan the structure 2+ years out so your shares are “onside” for the LCGE when a buyer does appear.
The thread through all of it: liquidity and structure have to be planned years ahead. Leave it to the moment of sale and you’re negotiating with one hand tied behind your back.
Frequently asked questions
How much can the Lifetime Capital Gains Exemption shelter in 2026?
For 2026, the LCGE can shelter roughly $1.25 million of capital gains on the sale of Qualified Small Business Corporation (QSBC) shares, and the limit is now indexed to inflation. The exemption is per individual, so family ownership can sometimes multiply it.
What is a Qualified Small Business Corporation (QSBC)?
A QSBC is a Canadian-controlled private corporation whose shares meet specific tests: at the time of sale at least ~90% of assets are used in an active business carried on mainly in Canada, more than 50% were so used throughout the prior 24 months, and you held the shares for at least 24 months.
What does 'purifying' a company mean?
Purifying means removing passive or non-business assets (excess cash, investment portfolios, certain real estate) from your operating company so the shares qualify as QSBC for the Lifetime Capital Gains Exemption. It's often done by moving assets to a holding company, and it can take two years or more to satisfy the tests.
How far ahead should I plan to sell my business?
At least two years, often more. The QSBC tests look back 24 months, purification takes time, and a valuation method should be agreed long before a buyer appears. Owners who plan only when a buyer shows up frequently lose the exemption or sell at a discount.
Why can't most business owners sell their business?
Far more owners want to sell than there are buyers and completed deals each year, most of an owner's wealth is locked in one illiquid asset, and few have a written transition plan. Without intentional planning, many owners end up unable to sell at the price they expected.
General information for Canadian incorporated business owners — not tax, accounting, or legal advice. Figures are current for 2026 and change yearly; tax outcomes depend on your province and situation. Confirm the details with your CPA before acting. Dundas Wealth operates as the brand of Dundas Life Inc. (FSRA #37628M).