DON’T Sell Your Small Business Shares Before Reading This (Advice from a Canadian CPA in Ottawa)

I am writing this article in February 2026 because we are right about to begin tax season and have already lost count of the number of people who've called in the first 30 days of 2026 asking for capital gains tax planning after they've already sold their company in 2025. This is something you need to tax plan before you sell, not after.

If you’re thinking about selling your small business shares, stop and read this first. You may be eligible to shelter up to $1,275,000 of capital gains from tax using the Lifetime Capital Gains Exemption (LCGE). But only if your shares qualify.

As a CPA in Ottawa, I’ve worked with business owners across Canada to structure their share sales, ensure LCGE eligibility, and avoid costly mistakes. I also work directly with your lawyer to handle the necessary steps and documentation before closing.

What is the Lifetime Capital Gains Exemption?

The LCGE allows Canadian business owners to sell qualified small business corporation (QSBC) shares and pay no tax on the first $1M+ of gains, if specific conditions are met.

The 3 Key Conditions to Qualify

To qualify for the exemption, all of the following must be true:

1. Small Business Corporation Test
   At the time of sale, at least 90% of the company’s assets must be used in an active business carried on in Canada. This is where most owners fail too much cash or investments on the balance sheet can disqualify you.
2. Holding Period Test
   You must have owned the shares for at least 24 months before the sale.
3. Share Ownership Test
   During those 24 months, more than 50% of the company’s assets must have been used in an active business in Canada.

How I Help

As a CPA who has guided multiple successful share sales, I work directly with you (and your lawyer) to:

• Review your corporation’s structure and balance sheet for purity
• Identify and remove non-active business assets (e.g. excess cash, investments)
• Create a pre-sale transaction plan to meet LCGE tests
• Coordinate with your legal team to ensure CRA compliance
• Prepare and file the necessary tax documentation

This is not something to leave to chance or handle at the last minute. CRA can audit your sale years after the fact and if they find issues, you may owe six figures in tax.

A Real-World Example

I recently worked with a client who was selling his company for $1.3M. We did a purity test and found $300K in excess cash and non-business investments that could jeopardize the LCGE. With advance planning, we moved those assets into a holding company, brought the balance sheet into compliance, and secured a tax-free sale of over $1M.

No audit, no issues because it was done properly.

Plan Before You Sell

If you’re selling your small business shares, talk to a CPA before you sign anything. Waiting until after the deal is done can cost you the exemption. Based in Ottawa, I work with clients across Ontario and Canada to navigate complex share sales with clarity and confidence. Need help with a share sale or LCGE eligibility review? Contact me for a consultation before you close the deal. One conversation could save you hundreds of thousands in tax.

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This is not legally binding tax advice. This is educational analysis. Say hello if you need help.

hello@taxesmadesimple.ca

WhatsApp - 613.600.4194

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