5 Steps to Successfully Sell Your Business in Canada

Selling your business can be a bittersweet experience. The acquisition indicates that you've built something successful, but moving on to the next chapter and navigating the logistics of transferring business ownership can be difficult. Fortunately, many business owners have previously walked this path, and some key steps can make the business sell Canada process easier. In this guide, we will shed light on those steps and how we at Ontario Commerical Group can help you in selling your business:

Table Of Contents:

• 5 Steps to Successfully Selling Your Business

1. Altering ownership

2. Knowing the tax ramifications

3. The Lifetime Capital Gains Exemption (LCGE)

4. Asset valuation and sale

5. Maintain organization and communicate frequently.

• Where to seek help?

• How can we help you?

• Finally

5 Steps to Successfully Selling Your Business

1. Altering ownership

The first step in our list of How to Sell a Business Successfully is altering the ownership. The company's ownership transfer depends on various factors, including business structure, partnership agreements, and registration name. In a sole proprietorship, the business's legal status must change if it is not incorporated or if the number of owners changes. If the business is sold or stopped operating, the new owner must obtain a new business number (BN) and program accounts. 

The impact of the partner change depends on the partnership agreement and whether the business was registered using each partner's legal name or the provincially registered partnership operating name. When the partners change, the business becomes a new legal entity and requires a new business number and program accounts. If a corporation fails to deduct, withhold, remit, or pay amounts held in trust for the Receiver General of Canada, the directors may be personally liable to pay the amount owed, including penalties and interest.

2. Knowing the tax ramifications

   
   

The Canadian government requires sellers to contact their tax services office if their company has a GST or HST account. However, if the seller and buyer agree to no GST or HST at the time of sale, it can be achieved if certain conditions are met. These include the seller selling business in Canada they founded or operated, and the buyer acquiring at least 90% of the necessary property for the business to operate. 

Any property not purchased under the terms of the agreement must be within 10% of the total amount of all purchased property's fair market value. For example, if real estate is bought separately, it should not cost more than 10% of the FMV of all the property needed to run the company. For more information on GST or HST charges, business acquisitions, and tax implications, visit the Government of Canada's website.

3. The Lifetime Capital Gains Exemption (LCGE)

You may be eligible for the lifetime capital gains exemption if you sell shares in your incorporated business.  Unincorporated businesses with potential buyers should consider incorporating before the sale to take advantage of this exemption. A maximum yearly index of capital gains from the sale can be excluded under the LCGE. To be eligible, 90% or more of the company's assets must be used principally in an active business, primarily in Canada, at the time of sale.

You can take additional steps to reduce capital gains taxes, such as reorganizing for a safe income strip, taking advantage of an estate freeze, retiring allowances, holding companies, and promissory notes. Consider making a charitable donation, or if you are selling to another company, you may choose to receive shares rather than a cash payment.

4. Asset valuation and sale

Determine whether you will set a price for the entire business or specific assets. When calculating a valuation, keep in mind intangibles such as goodwill and intellectual property. While this number is critical, it is equally important to find the right buyer for your business.

When it comes to selling your business, "value" and "price" are not the same thing. Learn about the different methods and approaches used to calculate the value of your assets. Passing the company down to a family member or trusted employee may provide better business continuity but result in a lower sale price. Selling to a third party or another company can result in a higher price, but careful transition planning is required. 

Finally, the profitability of your business and the records that prove it are critical in determining its value.

5. Maintain organization and communicate frequently.

Working with business advisors, attorneys, buyers' teams, and potential buyers all require effective communication. Share timelines, manage expectations, and provide a detailed transition plan to ensure the business value remains intact during the selling process. Develop a solid succession and exit strategy to ensure the business's value remains intact. Maintain organized paperwork and consider creating a digital document repository for prospective buyers and their teams. Collect financial statements, customer and supplier contracts, outstanding liabilities, asset lists, minute books, and employment contracts. 

Where to Seek Help?

Your business advisor at Ontario Commercial Group can assist in preparing the documents ahead of time when selling business in Ontario. Every transaction requires a legal team and trustworthy advisors because the stakes are high. Work with a legal team to ensure all details are correct and no details are overlooked. An expert Ontario Commercial Business Advisor can help with selling, starting an acquisition process, or signing paperwork.

How Can We Help You?

To help business owners maximize shareholder value when selling their company, Ontario Commercial Group has developed a thorough 10-step process. This, combined with our rigorous pre-screening and pre-qualifying process for potential business purchasers and our proprietary buyer database, puts us in a unique position to serve the needs of small to medium-sized businesses in Ontario.

We help you with the initial meeting/consultation, business valuation, enlisting our brokerage, creating promotional documents, marketing the business, screening prospective buyers, showing the business, negotiating the purchase agreement, performing due diligence, and closing the deal.

Finally

The decision to sell your business is serious, and the above steps can help you make the process easier. Also, we at Ontario Commercial Group can provide you with the necessary information to help you make it. We can help you prepare the business for sale in Canada, advise you on current market conditions, set the price and structure of the business sale transaction, and answer any other questions you may have. We'd love to hear from you.