How much tax do you pay when you sell a business in Ontario?
SHORT ANSWER
In a share sale, half of your capital gain is taxable (Prime Minister of Canada). At the top combined federal and Ontario rate in 2026, that works out to about 26.76% of the gain. The Lifetime Capital Gains Exemption can shelter up to $1,275,000 of gain per qualifying person (CRA).
The top combined federal and Ontario rates for 2026 are below (EY).
| Type of income | Effective top rate (Ontario, 2026) |
|---|---|
| Capital gain | 26.76% |
| Eligible dividend | 39.34% |
| Salary | 53.53% |
A spouse who has owned qualifying shares for 24 months can use a second exemption on the gain on their shares, for up to $2,550,000 sheltered in total (CRA).
Ontario companies also pay a reduced combined corporate rate on the first $500,000 of active business income: 12.2% before July 1, 2026, and 11.2% from July 1, 2026 (Ontario Budget 2026). Many owners spend heavily at year end to cut that tax, which lowers profit, and buyers pay a multiple of profit. Paying the tax and moving after-tax profit to a holding company usually does more for your sale price.
Do you charge HST when you sell a business in Ontario?
SHORT ANSWER
In a share sale, no HST applies to the shares. In an asset sale, HST can apply to taxable assets, but buyer and seller can often file a joint election under section 167 of the Excise Tax Act so no HST is charged, if the buyer acquires all or most of the business's assets and is HST-registered where required (CRA).
Talk to your CPA early. The election has conditions, and getting it wrong can leave one side with an unexpected HST bill.
What happens to employees when you sell a business in Ontario?
SHORT ANSWER
In a share sale, the employer doesn't change, so employment continues as before. In an asset sale, Ontario's Employment Standards Act generally treats employees the buyer keeps as having continuous service, so their years with you count toward notice and severance with the new owner (Government of Ontario).
Either way, plan how and when you tell your team. Key staff leaving during a sale is one of the fastest ways to lose value. A retention plan put in place well before the sale helps keep the people buyers are paying for.
What if your business owns its building?
SHORT ANSWER
A building your company uses for its own operations generally counts as an active business asset for the Lifetime Capital Gains Exemption. Property rented to others or held as an investment does not, and can push the company offside (CRA guide T4037).
Many owners still move the building into its own company and lease it back at market rent, which gives more options at sale. Plan either change at least 24 months ahead.
This comes up often in the GTA, where property values have risen faster than many businesses. If the building is sold as part of an asset sale, Ontario land transfer tax applies, and in Toronto the municipal land transfer tax applies as well (Bennett Jones).
Separating the real estate gives you options: sell it with the business, lease it to the buyer, or keep it as income. If you lease, check your lease now, because many Ontario commercial leases need landlord consent for an assignment or a change of control.
What legal rules apply when selling a business in Ontario?
SHORT ANSWER
Two Ontario rules come up often. Ontario no longer has a Bulk Sales Act, so buyers protect themselves through due diligence, lien searches and the purchase agreement. Representing a seller in a business sale for a fee is also generally treated as trading in real estate, which requires registration with RECO.
Is there a bulk sales law in Ontario?
No. Ontario's Bulk Sales Act was repealed in 2017; its final version ran to March 21, 2017 (Ontario e-Laws). Buyers now protect themselves through due diligence, lien searches, and the representations and indemnities in the purchase agreement.
Does a business broker need a licence in Ontario?
Generally, yes. Ontario's Trust in Real Estate Services Act defines real estate to include businesses, with or without premises, and prohibits trading in real estate unless registered (Trust in Real Estate Services Act, 2002). The individual and the brokerage must both be registered with the Real Estate Council of Ontario (RECO).
You can check registration on RECO's public registry. For more on how brokers and M&A advisors compare, see business broker vs M&A advisor.
Who is buying businesses in Ontario?
SHORT ANSWER
Ontario has one of the deepest buyer pools in Canada. Strategic buyers, private equity firms building platforms, individual buyers and search funds are all active, especially across the GTA, Hamilton, Kitchener-Waterloo and the wider Golden Horseshoe. What buyers look for differs by region.
| Region | What buyers often look for |
|---|---|
| Toronto and the GTA | Service businesses with recurring revenue, distribution, trades and add-ons for private equity platforms |
| Oakville, Burlington and Halton | Professional services, home services and specialty trades |
| Kitchener-Waterloo and Cambridge | Manufacturing, technology-enabled services and IT firms |
| Hamilton and Niagara | Manufacturing, industrial services and construction |
| London and Southwestern Ontario | Manufacturing, agri-business, automotive services and distribution |
The businesses that sell best in any region share the same traits: clean financials, a broad customer base, a team that runs without the owner, and a structure ready for the Lifetime Capital Gains Exemption.
Why don't local listings tell you what your business is worth?
SHORT ANSWER
Listing sites show asking prices, not closed prices. Asking prices are set to attract interest, and most completed private sales are never published. Your value depends on normalized earnings, the multiple your specific traits earn, and the deal terms, none of which a listing shows.
What this means for you
Use this Ontario pre-sale checklist to see where you stand:
- Tax: confirm your shares qualify for the LCGE, and plan any spousal share transfer or purification 24 months ahead
- HST: confirm whether a section 167 election will apply to an asset sale
- Real estate: move investment property out, consider separating the building you operate from, or check your lease for assignment and change-of-control terms
- Employees: review contracts and service dates, and plan retention for key staff
- Financials: three to five years of CPA-reviewed statements with documented add-backs
- Legal: minute books current, contracts checked for change-of-control clauses
For the full month-by-month process, see how to sell a business in Canada: the 12-month playbook.
