What Comes Next When I Sell or Pass Down My Business, and How Much Tax Gets Taken?

Every exit from a Canadian corporation triggers tax on the growth in your shares. On a sale, the Lifetime Capital Gains Exemption may shelter roughly $1.25 million of gain if the shares qualify. Passing the business to family is often done with an estate freeze. If you die still owning the shares, you're treated as having sold them at market value on your final return. A spouse can defer that until the second death, and without planning there can be a second layer of tax. All of it works better planned years ahead.

“What comes next after the sale?”

Owners usually start with the exit itself: a buyer, a child taking over, or simply “we all aren't going to be here forever.” The tax question is the same in each case: how much of what you built reaches you and your family, and how much goes to tax on the way?

Three ways out, three tax events

Exit	What triggers tax	Main planning tools
Selling to a buyer	A capital gain on your shares (or on the assets, if the buyer buys assets)	Lifetime Capital Gains Exemption; moving passive assets out first so the shares qualify
Passing it to family	Depends on how the shares move; a straight transfer can trigger a gain	Estate freeze, family trust, and advice on the rules for transfers to the next generation
Dying while you own it	A deemed sale of your shares at market value on your final return	Spousal rollover, post-mortem planning, and cash to pay the bill (often life insurance)

Selling

For 2026, the Lifetime Capital Gains Exemption can shelter roughly $1.25 million of capital gains on the sale of qualified small business corporation shares. Broadly, you must have held the shares for 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 the prior 24 months. A company carrying lots of cash or investments may fail those tests, and fixing that (often by moving assets to a holding company) can take two years or more. See why selling rarely funds retirement.

Passing it down

An estate freeze fixes the value of your shares at today's level and passes future growth to the next generation, often through a family trust. It stops your tax bill from growing; it doesn't pay the bill that already exists. Transfers to children have their own rules, and how they apply depends on how the business is run and who runs it. This is lawyer-and-accountant work. See holding company vs family trust.

When you're the end of the line for the rollover

Property left to a spouse can roll over at cost, so the tax waits. When the surviving spouse dies, or if there's no spouse, the shares are treated as sold at market value on the final return. A company built from nothing has a gain almost equal to its value. That tax is due in cash, usually within months, and there can be a second layer when the corporation's assets are later paid out unless your accountant does post-mortem planning. See estate liquidity.

What we hear when owners talk about leaving

When owners tell us about an exit, they usually put a timeline on it: “a year or two,” “three or four years or five years if I decide to sell,” “twenty years before we pass it down.” That timeline matters, because qualifying shares for the exemption and setting up a freeze both take years.

When a family trust comes up, Greg finds that many owners he talks to picture an American-style trust. Canadian trusts are more limited, and they're set up less often than people expect. That's a conversation for your lawyer and accountant, and it's better had early.

Who this is for, and who it isn't

Run your own numbers

Questions to ask your accountant

• Would my shares qualify for the capital gains exemption if I sold today? If not, what would it take?
• What would the tax on my final return be if I died this year?
• Would an estate freeze make sense now, and who should hold the new shares?
• Is there a second layer of tax on my corporation at death, and how would you prevent it?

Related guides

Frequently asked questions

How much tax do I pay when I sell my business in Canada?

A sale of shares creates a capital gain. If the shares qualify as qualified small business corporation shares, the Lifetime Capital Gains Exemption may shelter roughly $1.25 million of gain for 2026. Gains above that, or on shares that don't qualify, are taxed. Your accountant can estimate the figure for your company.

What happens to my corporation when I die?

You're treated as having sold your shares at market value, and the gain goes on your final tax return. Shares left to a spouse can roll over at cost, deferring the tax to the second death. Without post-mortem planning there can be a second layer of tax when the corporation's assets are paid out.

What is an estate freeze?

An estate freeze fixes the value of your shares at today's level and passes future growth to the next generation, often through a family trust. It caps the tax bill at death; it doesn't pay the bill that already exists.

How is Dundas Wealth paid?

Dundas Wealth is an insurance brokerage (Dundas Life Inc., FSRA #37628M). The strategy session is free. If a life insurance policy is part of your plan and you decide to go ahead, the insurance carrier pays us a commission when the policy is placed. You don't pay us a fee, and if your structure is already right, your one-page brief will say so.

Figures are current as of 2026 and are general information, not tax, legal or investment advice. Rules and rates change, and how they apply depends on your facts. Confirm anything here with your accountant before acting. Dundas Wealth is an insurance brokerage (Dundas Life Inc., FSRA #37628M). We are paid by the insurance carrier if and when a policy is placed.